Item 1.01. Entry into a Material Definitive Agreement.
On February 3, 2020, Cerecor entered into a Contingent Value Rights Agreement
(the "CVR Agreement") with American Stock Transfer & Trust Company, LLC.
Reference is made to Item 2.01 of this Current Report on Form 8-K, which is
incorporated into this Item 1.01 by reference.
Item 1.02. Termination of a Material Definitive Agreement.
On January 31, 2020, Cerecor and Armistice Capital Master Fund Ltd.
("Armistice") terminated the Backstop Agreement by and between the Cerecor and
Armistice, dated December 5, 2019, without the Company exercising its option to
require Armistice to purchase shares of the Cerecor's common stock. There were
no termination penalties incurred by Cerecor related to the termination of the
Backstop Agreement.
Item 2.01. Completion of Acquisition or Disposition of Assets.
On February 3, 2020, the Merger was consummated in accordance with the terms of
the Merger Agreement and each outstanding common stock of Aevi, par value of
$0.0001 per share, was converted into the right to receive (i) the fraction of a
share of Cerecor common stock, par value of $0.001 per share, at a ratio equal
to 0.0334, which in the aggregate totaled approximately 3.9 million shares of
Cerecor common stock issued to Aevi stockholders; (ii) one contingent value
right, which represents the right to receive the pro rata portion of contingent
payments of up to $6.5 million, to be paid in cash or Cerecor common stock in
the sole discretion of Cerecor, upon the achievement of certain milestones in
accordance with the CVR Agreement; and (iii) cash in lieu of fractional shares
of Cerecor common stock, which in the aggregate totaled approximately $1,000.
Additionally, each outstanding Aevi stock option was canceled and each
outstanding Aevi warrant was exercised on a cashless basis prior to the
Effective Time.
Following the closing of the Merger, pre-closing Cerecor stockholders owned, on
a fully-diluted basis approximately 93.1% of Cerecor common stock and
pre-closing Aevi stockholders owned approximately 6.9% of Cerecor common stock.
As of February 3, 2020, after giving effect to the closing of the Merger, there
were approximately 56.3 million shares of Cerecor common stock outstanding.
The issuance of the shares of Cerecor common stock to the former stockholders of
Aevi in connection with the Merger and the related transactions did not require
approval by Cerecor stockholders. On February 3, 2020, prior to the consummation
of the Merger, the stockholders of Aevi approved the Merger Agreement at a
special meeting of Aevi stockholders.
The foregoing description of the Merger Agreement and CVR Agreement is not
complete and is qualified in its entirety by reference to the Merger Agreement,
which was previously filed as Exhibit 2.1 to the Current Report on Form 8-K/A,
filed on December 11, 2019, and the CVR Agreement, which is filed as Exhibit
10.1 hereto, and both are incorporated herein by reference.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers;
Compensatory Arrangements of Certain Officers.
Board Composition
Effective upon the consummation of the Merger, Cerecor's board of directors was
increased from seven to nine board seats and Sol J. Barer, Ph.D and Michael F.
Cola were appointed to the board. Accordingly, immediately following the
effective time of the Merger, the directors serving on the board of directors of
Cerecor are: Dr. Barer, Steven J. Boyd, Mr. Cola, Peter Greenleaf, Phil Gutry,
Uli Hacksell, Ph.D., Keith Schmidt, Magnus Persson, M.D., Ph.D., and Simon
Pedder, Ph.D., who serves as Executive
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Chairman of the board of directors. Dr. Barer and Mr. Cola served as directors
of Aevi prior to the closing of the Merger. The Cerecor board of directors has
affirmatively determined that all Cerecor directors, except for Mr. Cola, Dr.
Pedder, and Mr. Greenleaf, are independent directors within the meaning of the
applicable Nasdaq listing standards. The members of Cerecor's audit committee,
compensation committee and nominating and corporate governance committee did not
change following the consummation of the Merger and all members of such
committees are independent directors under the applicable Nasdaq listing
standards.
The Board approved an option grant to Dr. Barer to purchase 500,000 shares of
common stock which will vest over three years, with one-third of such option
vesting on each of the first, second and third anniversaries of the date of
grant.
Michael F. Cola and Garry A. Neil
Effective upon the consummation of the Merger, Cerecor entered into an
employment agreement with Mr. Cola for him to serve as Cerecor's Chief Executive
Officer (the "Cola Employment Agreement") and an employment agreement with Dr.
Garry A. Neil for him to serve as Cerecor's Chief Medical Officer (the "Neil
Employment Agreement", together with the Cola Employment Agreement, the
"Employment Agreements").
Mr. Cola, 60, served as Aevi's President and Chief Executive Officer from
September 2013 until February 2020. Prior to joining Aevi, Mr. Cola served as
President of Specialty Pharmaceuticals at Shire plc, a global specialty
pharmaceutical company, from 2007 until April 2012. He joined Shire in 2005 as
EVP of Global Therapeutic Business Units and Portfolio Management. Prior to
joining Shire, he was with Safeguard Scientifics, Inc., a growth capital
provider to life sciences and technology companies, where he served as President
of the Life Sciences Group. While at Safeguard, Mr. Cola served as Chairman and
CEO of Clarient, Inc., a cancer diagnostics company subsequently acquired by GE
Healthcare, and as Chairman of Laureate Pharma, Inc., a full-service contract
manufacturing organization serving research-based biologics companies. Prior to
Safeguard Scientifics, Mr. Cola held senior positions in product development and
commercialization at AstraMerck, a top 20 U.S. pharmaceutical company, and at
AstraZeneca, a global biopharmaceutical company. Mr. Cola received a B.A. in
biology and physics from Ursinus College and an M.S. in biomedical science from
Drexel University. He serves on the Board of Directors of Vanda Pharmaceuticals
Inc., Sage Therapeutics, and serves as Chairman of the Board of Governors of the
Boys & Girls Clubs of Philadelphia. Mr. Cola also served on the Life Sciences
Pennsylvania Board (formerly named Pennsylvania Bio) from 2009 until 2015.
Dr. Neil, 66, joined Aevi in September 2013. Prior to that, Dr. Neil was a
Partner at Apple Tree Partners, a life sciences private equity fund. Prior to
joining Apple Tree Partners in 2012, he was Corporate VP of Science & Technology
at Johnson & Johnson, and Group President at Johnson & Johnson Pharmaceutical
Research and Development. Prior to joining Johnson & Johnson in 2002, he held
senior positions at AstraZeneca, EMD Pharmaceuticals and Merck KGaA. Under his
leadership a number of important new medicines for the treatment of cancer,
anemia, infections, central nervous system and psychiatric disorders, pain, and
genitourinary and gastrointestinal diseases gained initial or expanded
approvals. Dr. Neil holds a B.S. from the University of Saskatchewan and an M.D.
from the University of Saskatchewan College of Medicine. He completed
postdoctoral clinical training in internal medicine and gastroenterology at the
University of Toronto. Dr. Neil also completed a postdoctoral research
fellowship at the Research Institute of Scripps Clinic. He has served on the
Board of Directors of GTx, Inc. (NASDAQ: GTXI) since September 2016 and on the
Board of Directors of Arena Pharmaceuticals, Inc. (NASDAQ: ARNA) since February
2017. He serves on the Boards of the Reagan Udall Foundation and the Center for
Discovery and Innovation (CDI). He is a past Chairman of the Pharmaceutical
Research and Manufacturers Association (PhRMA) Science and Regulatory Executive
Committee and the PhRMA Foundation Board, and a past member of the Foundation
for the U.S. National Institutes of Health (NIH) and the Science Management
Review Board of the NIH.
Mr. Cola and Dr. Neil have no familial relationships with any executive officer
or director of Cerecor. Other than as disclosed below, there have been no
transactions in which Cerecor has participated and in which Mr. Cola or Dr. Neil
had a direct or indirect material interest that would be required to be
disclosed under Item 404(a) of Regulation S-K.
In July 2019, Aevi entered into a royalty agreement, and liabilities thereunder
were assumed by Cerecor upon closing of the Merger, with Michael F. Cola,
Cerecor's new Chief Executive Officer, Joseph J. Grano, Jr., Kathleen Jane
Grano, Joseph C. Grano, The Grano Children's Trust, Joseph C. Grano, trustee and
LeoGroup Private Investment Access, LLC on behalf of Garry A. Neil, Cerecor's
new Chief Medical Officer, in exchange for a one-time aggregate payment of $2
million (the "Royalty Agreement"). Collectively, the investors will be entitled
to an aggregate amount equal to a low-single digit percentage of the aggregate
net sales of Astellas' second generation mTORC1/2 inhibitor, CERC-006 (the "OSI
Products"). At any time beginning three years after the date of the first public
launch of an OSI Product, Cerecor may exercise, at our sole discretion, a buyout
option that terminates any further obligations under the Royalty Agreement in
exchange for a payment to Investors of an aggregate of 75% of the net present
value of the royalty payments. A majority of the independent members of the
board of directors or the audit committee of Aevi approved the Royalty
Agreement.
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Pursuant to the Employment Agreements, Mr. Cola and Dr. Neil began full-time
employment with Cerecor upon the effective time of the Merger on February 3,
2020, at an initial base salary of $450,000 per year and $410,000 per year,
respectively, subject to review and adjustment by the Board from time to time.
The independent directors of the Board approved an inducement option grant to
Mr. Cola to purchase 1.2 million shares of common stock and an inducement option
grant to Dr. Neil to purchase 800,000 shares of common stock. Each inducement
option grant will vest over four years, with the first 25% of such option
vesting on the first anniversary, and the remainder vesting in equal monthly
installments, provided that Mr. Cola or Dr. Neil, respectively, remains an
employee of Cerecor as of each such vesting date. Mr. Cola will be eligible to
receive a discretionary annual bonus with a target amount of 70% of his base
salary and Dr. Neil and will be eligible to receive a discretionary annual bonus
with a target amount of 60% of his base salary, both as determined by the Board
or the compensation committee in its sole discretion (and pro-rated for 2020).
Mr. Cola and Dr. Neil will also be eligible for a discretionary annual bonus
consisting of restricted stock or options at the discretion of the Board or
compensation committee. Mr. Cola and Dr. Neil will also be eligible to
participate in Cerecor's other employee benefit plans as in effect from time to
time on the same basis as are generally made available to other senior
executives of Cerecor.
If employment of Mr. Cola or Dr. Neil is terminated by Cerecor without "Cause"
or by Mr. Cola or Dr. Neil for "Good Reason" (each as defined in the Employment
Agreements), in each case subject to the executive entering into and not
revoking a separation agreement in a form acceptable to Cerecor, the executive
whose employment has terminated will be eligible to receive:
(i) accrued benefits under his Employment Agreement;
(ii) subject to complying with obligations set forth in his Employment
Agreement, continued payment of the executive's base salary for 18
consecutive months;
(iii) 100% of the annual bonus earned in the year in which the termination
occurs, payable when such annual bonuses are paid to other executive
employees of Cerecor;
(iv) full vesting of options awarded by Cerecor; and
(v) if he timely elects and remains eligible for continued coverage under
COBRA, the COBRA premiums necessary to continue the health insurance
coverage in effect for the executive and his covered dependents prior
to the date of termination, until the earliest of (x) the first
anniversary of his termination, (y) expiration of the executive's
continuation coverage under COBRA, or (z) the date when the executive
is eligible for substantially equivalent health insurance.
If a termination without Cause occurs within six months of a Change in Control
(as defined in the Employment Agreements), then the amounts payable to the
executive pursuant to clauses (i)-(iii) above are payable at the later of the
closing of the Change in Control or the termination of the executive's
employment. Subsequent to any termination, the executive will be subject to a
confidentiality covenant, a non-disparagement covenant, a one-year
non-competition covenant, and a one-year non-solicitation and non-interference
covenant.
The foregoing summaries of the material terms of the Cola Employment Agreement
and Neil Employment Agreement are qualified in their entirety by reference to
the complete text of the agreements, copies of which are filed as Exhibit 10.3
and Exhibit 10.4 hereto and are incorporated herein by reference.
Indemnification Agreements
In connection with the Merger, Dr. Barer, Mr. Cola and Dr. Neil have entered
into our standard indemnification agreement with Cerecor, dated and effective as
of February 3, 2020. The form indemnification agreement is attached hereto as
Exhibits 10.2 to this Current Report on Form 8-K and is incorporated by
reference into this Item 5.02.
Item 9.01. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
(i) Audited Consolidated Financial Statements for Aevi Genomic
Medicine, Inc. as of December 31, 2018 and 2017.
(ii) Unaudited Condensed Consolidated Financial Statements for Aevi
Genomic Medicine, Inc. as of
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September 30, 2019 and for the Three- and Nine-Month Periods Ended September 30,
2019 and September 30, 2018.
(b) Pro forma financial information.
The following unaudited pro forma combined financial statements giving effect to
the Merger completed February 3, 2020 (as of September 30, 2019) are included in
this report:
(i) Unaudited pro forma condensed combined balance sheet as of
September 30, 2019.
(ii) Unaudited pro forma condensed combined statement of operations
for the nine months ended September 30, 2019.
(iii) Unaudited pro forma condensed combined statement of operations
for the year ended December 31, 2018.
(d) Exhibits.
Exhibit No. Description
10.1 Contingent Value Rights Agreement, effective February 3, 2020, by
and between Cerecor Inc. and American Stock Transfer & Trust Company,
LLC.
10.2 Form of Director Indemnification Agreement (incorporated by
reference to Exhibit 10.12 to Registration Statement on Form S-1/A of
Cerecor Inc. filed with the Securities and Exchange Commission on
September 8, 2015).
10.3 Employment Agreement, effective February 3, 2020, by and between
Cerecor Inc. and Michael F. Cola.
10.4 Employment Agreement, effective February 3, 2020, by and between
Cerecor Inc. and Garry A. Neil.
23.1 Consent of Ernst & Young LLP, independent registered public
accountant for Aevi Genomic Medicine, Inc.
99.1 Press Release dated February 3, 2020, entitled "Cerecor and Aevi
Genomic Medicine Complete Merger".
99.2 Audited Consolidated Financial Statements for Aevi Genomic Medicine,
Inc. as of December 31, 2018 and 2017.
99.3 Unaudited Condensed Consolidated Financial Statements for Aevi
Genomic Medicine, Inc. as of September 30, 2019 and for the Three- and
Nine-Month Periods Ended September 30, 2019 and September 30, 2018.
99.4 Management's Discussion and Analysis of Financial Condition and
Results of Operations of Aevi Genomic Medicine, Inc.
99.5 Unaudited Pro Forma Condensed Combined Financial Statements.
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