Item 1.01 Entry into a Material Definitive Agreement.
Merger Agreement
On January 19, 2021, Obalon Therapeutics, Inc., a Delaware corporation
("Obalon"), Optimus Merger Sub, Inc., a Delaware corporation, and a direct,
wholly owned subsidiary of Obalon ("Merger Sub"), and ReShape
Lifesciences, Inc., a Delaware corporation ("ReShape"), entered into an
Agreement and Plan of Merger (the "Merger Agreement"). Pursuant to the Merger
Agreement, and subject to the satisfaction or waiver of the conditions specified
therein, Merger Sub shall be merged with and into ReShape, with ReShape
surviving as a wholly owned subsidiary of Obalon. Capitalized terms used herein
but not defined shall have the respective meanings assigned to them in the
Merger Agreement.
The board of directors of each of Obalon and ReShape has unanimously approved
the Merger Agreement and the transactions contemplated thereby.
Merger Consideration
At the effective time of the Merger (the "Effective Time"), each share of common
stock, par value $0.001 per share, of ReShape ("ReShape Common Stock") and each
share of Series B Preferred Stock, par value $0.01 per share, of ReShape
(together with ReShape Common Stock, "ReShape Shares") issued and outstanding
immediately prior to the Effective Time (other than the shares that are owned by
Obalon, ReShape, or Merger Sub) will be converted into the right to receive a
number of fully paid and non-assessable shares of common stock of Obalon, $0.001
par value per share (an "Obalon Share") according to a ratio determined at least
10 days prior to the Obalon Stockholders' Meeting that will result in the
holders of such ReShape Shares owning 51% of the outstanding Obalon Shares
immediately after the Effective Time (such ratio, the "Exchange Ratio").
Treatment of Equity
The Merger Agreement provides that, at the Effective Time, each outstanding
warrant to purchase capital stock of ReShape ("ReShape Warrant") will be
converted into warrants to purchase a number of Obalon Shares equal to the
number of shares of ReShape Common Stock issuable upon exercise of such ReShape
Warrant multiplied by the Exchange Ratio with an exercise price equal to the
exercise price of such ReShape Warrant divided by the Exchange Ratio. In
addition, each outstanding option to purchase ReShape Common Stock, whether
vested or unvested, ("ReShape Option") shall be cancelled and terminated without
any payment. Obalon will assume the obligations of the Series C Preferred Stock,
par value $0.01 per share of ReShape ("ReShape Series C Preferred Stock") and
shall file a new certificate of designation with the same terms and conditions
as the ReShape Series C Certificate of Designation. Each outstanding option to
purchase Obalon Shares and each outstanding restricted stock unit granted under
an Obalon equity plan will become fully vested at the Effective Time.
Governance
The Merger Agreement provides that as of the Effective Time, Obalon will be
renamed ReShape Lifesciences Inc. (the "Combined Company") and the five current
directors of ReShape will be comprise the board of directors of the Combined
Company: Dan W. Gladney, Barton P. Bandy, Arda M. Minocherhomjee, Ph.D., Lori C.
McDougal and Gary D. Blackford. Mr. Gladney will serve as the chairperson and
Mr. Blackford will serve as lead director of the board of directors. As of the
Effective Time, Mr. Bandy will serve as chief executive officer and Tom
Stankovich will serve as the chief financial officer of the Combined Company.
Conditions to the Merger
The consummation of the Merger is subject to customary closing conditions,
including (i) approval of the issuance of Obalon Shares in connection with the
Merger by the affirmative vote of the majority of Obalon Shares cast at the
Obalon Shareholders' Meeting in favor of the issuance of Obalon Shares in
connection with the Merger, (ii) the adoption of the Merger Agreement by the
affirmative vote of the holders of a majority of all outstanding shares of
ReShape common stock entitled to vote thereon, (iii) the absence of any law or
order by any governmental entity in effect that seeks to enjoin, make illegal,
delay or otherwise restrain or prohibits the consummation of the Merger,
(iv) Nasdaq's approval of the Obalon Shares to be issued in the Merger being
listed on the Nasdaq, (v) Nasdaq's approval of the continued listing application
for the Combined Company to maintain Obalon's Nasdaq listing, (vi) subject to
certain materiality exceptions, the accuracy of certain representations and
warranties of each of Obalon and ReShape contained in the Merger Agreement and
the compliance by each party with the covenants contained in the Merger
Agreement, (vii) the absence of a material adverse effect with respect to each
of Obalon and ReShape and (viii) the registration statement registering the
merger consideration becoming effective.
--------------------------------------------------------------------------------
Certain Other Terms of the Merger Agreement
Obalon, ReShape, and Merger Sub each made certain representations, warranties
and covenants in the Merger Agreement, including, among other things, covenants
by Obalon and ReShape to conduct their businesses in the ordinary course during
the period between the execution of the Merger Agreement and consummation of the
Merger, to refrain from taking certain actions specified in the Merger Agreement
and to use commercially reasonable efforts to cause the conditions of the Merger
to be satisfied. Subject to certain exceptions, the Merger Agreement also
requires each of ReShape and Obalon to call and hold stockholders' meetings and
requires the board of directors of each of ReShape and Obalon to recommend
approval of the transactions contemplated by the Merger Agreement.
Obalon and ReShape are restricted from soliciting any acquisition proposals, or
engaging in any discussions related to such proposals, although each party may
engage in discussions related to a superior proposal subject to certain
conditions.
Each party's board of directors may change its recommendation to its
stockholders in response to a superior proposal or an intervening event (each as
defined in the Merger Agreement) (after giving the other party at least five
business days' notice and an opportunity to negotiate an alternative
transaction) or if the board of directors determines that the failure to take
such action would constitute a breach of the directors' fiduciary duties under
applicable law.
The Merger Agreement provides for certain termination rights for both Obalon and
ReShape. Upon execution and delivery of the Merger Agreement, ReShape will have
deposited $1.0 million with a third-party escrow agent to secure the obligations
of ReShape to use its reasonable best efforts to obtain Nasdaq's approval of
(i) a Listing of Additional Shares Notice covering the Obalon Shares to be
issued in the Merger and (ii) the continued listing application for the Combined
Company ((i) and (ii) together, the "Nasdaq Approvals"). If Obalon terminates
the Merger Agreement as a result of ReShape's breach of its covenant to use its
reasonable best efforts to obtain the Nasdaq Approvals, or if either party
terminates the Merger Agreement because the Nasdaq Approvals have not been
obtained within 30 days following the later of the Obalon Stockholders' Meeting
and the ReShape Stockholders' Meeting, then ReShape will be required to pay
Obalon the $1.0 million termination fee.
The foregoing summary does not purport to be a complete description and is
qualified in its entirety by reference to the full text of the Merger Agreement,
which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
The Merger Agreement has been attached as an exhibit to this report to provide
investors and security holders with information regarding its terms. It is not
intended to provide any other factual information about Obalon or ReShape or to
modify or supplement any factual disclosures about Obalon or ReShape in its
public rep orts filed with the SEC. The Merger Agreement includes
representations, warranties and covenants of Obalon and ReShape made solely for
the purposes of the Merger Agreement and which may be subject to important
qualifications and limitations agreed to by Obalon and ReShape in connection
with the negotiated terms of the Merger Agreement. Moreover, some of those
representations and warranties may not be accurate or complete as of any
specified date, may be subject to certain disclosures between the parties and a
contractual standard of materiality different from those generally applicable to
Obalon's or ReShape's SEC filings. In addition, the representations and
warranties were made for purposes of allocating risk among the parties to the
Merger Agreement and should not be relied upon as establishing factual matters.
Voting Agreements
On January 19, 2021, following the execution of the Merger Agreement, Obalon
entered into a Voting and Support Agreement (the "ReShape Voting Agreement")
with Armistice Capital Master Fund Ltd. ("Armistice"). Armistice is the
beneficial owner of approximately 86.4% of the currently outstanding common
stock of ReShape. Pursuant to the ReShape Voting Agreement, Armistice has
agreed, among other things, to vote its shares in favor of the adoption of the
Merger Agreement and against any alternative proposal and against approval of
any proposal made in opposition to, in competition with, or inconsistent with,
the Merger Agreement, the Merger or any other transactions contemplated by the
Merger Agreement.
The foregoing summary of the ReShape Voting Agreement is subject to, and
qualified in its entirety by, the full text of the form of ReShape Voting
Agreement, a copy of which is attached hereto as Exhibit 10.1 and is
incorporated herein by reference.
On January 19, 2021, following the execution of the Merger Agreement, ReShape
entered into a Voting and Support Agreement (the "Obalon Voting Agreement") with
each of Domain Partners VII, L.P. and DP VII Associates, L.P.,
--------------------------------------------------------------------------------
InterWest Partners X, L.P., Okapi Ventures, L.P. and Okapi Ventures II, L.P.,
Armistice Capital Master Fund Ltd. (in its capacity as a stockholder of Obalon),
and Andrew Rasdal, the President and Chief Executive Officer of Obalon, through
his family trust. Together, such stockholders of Obalon are the beneficial owner
of approximately 24.3% of the currently outstanding common stock of Obalon.
Pursuant to the Obalon Voting Agreement, such stockholders have agreed, among
other things, to vote their shares (A) in favor of (i) the issuance of the
Obalon shares in connection with the Merger, and (ii) the authorization of the
Obalon board of directors to amend Obalon's certificate of incorporation to
effect a reverse stock split of Obalon's common stock at a ratio to be
determined by the Obalon board of directors with the consent of ReShape and
against any alternative proposal and (B) against approval of any proposal made
in opposition to, in competition with, or inconsistent with, the Merger
Agreement, the Merger or any other transactions contemplated by the Merger
Agreement.
Additional Information
In connection with the proposed merger, Obalon and ReShape plan to file with the
Securities and Exchange Commission (the "SEC") and mail or otherwise provide to
their respective stockholders a joint proxy statement/prospectus and other
relevant documents in connection with the proposed merger. Before making a
voting decision, Obalon's and ReShape's stockholders are urged to read the joint
proxy statement/prospectus and any other documents filed by each of Obalon and
ReShape with the SEC in connection with the proposed merger or incorporated by
reference therein carefully and in their entirety when they become available
because they will contain important information about Obalon, ReShape and the
proposed transactions. Investors and stockholders may obtain a free copy of
these materials (when they are available) and other documents filed by Obalon
and ReShape with the SEC at the SEC's website at www.sec.gov, at Obalon's
website at www.investor.obalon.com, at ReShape's website at
www.ir.reshapelifescience.com or by sending a written request to Obalon at 5421
Avenida Encinas, Suite F, Carlsbad, California 92008, Attention: Legal.
Participants in the Solicitation
This document does not constitute a solicitation of proxy, an offer to purchase
or a solicitation of an offer to sell any securities Obalon and ReShape and
their respective directors, executive officers and certain other members of
management and employees may be deemed to be participants in soliciting proxies
from their respective stockholders in connection with the proposed merger.
Information regarding the persons who may, under the rules of the SEC, be
considered to be participants in the solicitation of Obalon's and ReShape's
stockholders, respectively, in connection with the proposed merger will be set
forth in joint proxy statement/prospectus if and when it is filed with the SEC
by Obalon and ReShape. Security holders may obtain information regarding the
names, affiliations and interests of Obalon's directors and officers in Obalon's
Annual Report on Form 10-K and Form 10-K/A for the fiscal year ended
December 31, 2019, which was filed with the SEC on February 27, 2020 and
April 29, 2020, respectively, and its definitive proxy statement for the 2020
annual meeting of stockholders, which was filed with the SEC on August 7, 2020.
Security holders may obtain information regarding the names, affiliations and
interests of ReShapes's directors and officers in ReShape's Annual Report on
Form 10-K for the fiscal year ended December 31, 2019, which was filed with the
SEC on April 30, 2020 and its Form 3s and 4s filed on behalf on its directors
and officers. To the extent the holdings of Obalon securities by Obalon's
directors and executive officers or the holdings of ReShape's securities by
ReShape's directors and executive officers have changed since the amounts set
forth in Obalon's proxy statement for its 2020 annual meeting of stockholders or
ReShape's proxy statement for its most recent special meeting of stockholders,
respectively, such changes have been or will be reflected on Statements of
Change in Ownership on Form 4 filed with the SEC. Additional information
regarding these individuals and any direct or indirect interests they may have
in the proposed merger will be set forth in the joint proxy statement/prospectus
when and if it is filed with the SEC in connection with the proposed merger, at
. . .
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
Exhibit Number Description of Exhibit
2.1 Agreement and Plan of Merger, dated as of January 19, 2021, by and
among Obalon Therapeutics, Inc., Optimus Merger Sub, Inc., and
ReShape Lifesciences Inc.*
99.1 ReShape Voting Agreement, dated as of January 19, 2021, by and
between Obalon Therapeutics, Inc. and Armistice Capital Master
Fund Ltd.
--------------------------------------------------------------------------------
* The schedules to the Agreement and Plan of Merger have been omitted from this
filing pursuant to Item 601(b)(2) of Regulation S-K. Registrant will furnish
copies of such schedules to the Securities and Exchange Commission upon request
by the Commission.
--------------------------------------------------------------------------------
© Edgar Online, source Glimpses