ACLARIS THERAPEUTICS,INC. (NASDAQ:ACRS) Files An 8-K Entry into a Material Definitive AgreementItem 1.01Entry into a Material Definitive Agreement.
On August 3, 2017, Aclaris Therapeutics, Inc. (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Confluence Life Sciences, Inc., a Delaware corporation (“Confluence”), Aclaris Life Sciences, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), and Fortis Advisors LLC, as representative of the holders of Confluence equity (the “Confluence Equityholder Representative”). The Merger Agreement provides for Merger Sub to merge with and into Confluence (the “Merger”), with Confluence surviving as a wholly owned subsidiary of the Company, subject to the terms and conditions set forth in the Merger Agreement. Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Merger Agreement.
to the Merger Agreement, and upon the terms and subject to the conditions thereof, at the closing, the Company is required to pay holders of Confluence’s capital stock and options to purchase Confluence’s common stock (collectively, the “Confluence Equityholders”), upfront consideration of $20,000,000, consisting of, and subject to adjustment with respect to, the following: (A) an amount in cash equal to (i) $10,000,000, plus (ii) all cash and cash equivalents held by Confluence and its subsidiaries at Closing, plus (iii) the aggregate exercise price of all outstanding Confluence options, plus (iv) the amount, if any, by which the Closing Net Working Capital is greater than the Target Working Capital, minus (v) the amount, if any, by which the Closing Net Working Capital is less than the Target Working Capital, minus (vi) $1,000,000, set aside in escrow, minus (vii) the Unpaid Company Transaction Expenses, minus (viii) an amount set aside for expenses incurred by the Confluence Equityholder Representative and minus (ix) an amount equal to any indebtedness of Confluence at closing; and (B) (i) 349,527 shares of theCompany’s common stock, $0.00001 par value per share (the “Common Stock”), which number of shares is determined by dividing $10,000,000 by the average closing price of the Common Stock on The Nasdaq Global Select Market for the 20 consecutive trading days ending on the trading day immediately preceding the closing date (the “Common Stock Price”), with adjustments to avoid the issuance of fractional shares, minus (ii) 34,955 shares of Common Stock set aside in escrow, which number of shares is determined by dividing $1,000,000 by the Common Stock Price. The Confluence Equityholders receiving shares of Common Stock in the Merger are required to sign lock-up agreements that, among other things, provide for a lock-up period of six months for all shares issued in the Merger.
The Company has also agreed to pay the Confluence Equityholders contingent consideration of up to $80,000,000upon theCompany’s achievement of specified development, regulatory and commercial milestones set forth in the Merger Agreement. Of the contingent consideration, up to $2,500,000 may be paid in shares of the Common Stock upon the achievement of a specified development milestone. In addition to the foregoing contingent payments, the Company has agreed to pay the Confluence Equityholders specified future royalty payments calculated as a low single-digit percentage of annual net sales, subject to specified reductions, limitations and other adjustments, until the date that all of the patent rights for a particular product have expired, as determined on a country-by-country and product-by-product basis or, in specified circumstances, ten years from the first commercial sale of such product. In addition, if the Company sells, licenses or transfersany of the intellectual property acquired from Confluence to the Merger Agreement to a third party, the Company will be obligated to pay the Confluence Equityholders a portion of any incremental consideration (in excess of the development and milestone payments described above) that the Company receives from such sales, licenses or transfers in specified circumstances.
The Merger Agreement contains customary representations, warranties, covenants and indemnities of each of the Company and Confluence.
The foregoing summary is qualified in its entirety by reference to the Merger Agreement, which the Company expects to file as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ending September 30, 2017. The representations, warranties and covenants contained in the Merger Agreement were made only for the purposes of the Merger Agreement, were made as of specific dates, and were made solely for the benefit of the parties to the Merger Agreement and may not have been intended to be statements of fact but, rather, as a method of allocating risk and governing the contractual rights and relationships among the parties to the Merger Agreement. The assertions embodied in those representations and warranties may be subject to important qualifications and limitations agreed to by the Company and Confluence in connection with negotiating their respective terms. 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 stockholders of the Company. For the foregoing reasons, none of the Company’s stockholders or any other person should rely on such representations and warranties, or any characterizations thereof, as statements of factual information at the time they were made or otherwise.