PROPHASE LABS, INC. (NASDAQ:PRPH) Files An 8-K Entry into a Material Definitive Agreement

PROPHASE LABS, INC. (NASDAQ:PRPH) Files An 8-K Entry into a Material Definitive Agreement

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Item 1.01. Entry Into a Material Definitive Agreement

Asset Purchase Agreement

On January 6, 2017, ProPhase Labs, Inc., a Delaware corporation
(the Company), entered into an Asset Purchase Agreement (the
Purchase Agreement) with a wholly owned subsidiary of Mylan N.V.
(Mylan).

to the terms and subject to the conditions set forth in the
Purchase Agreement, the Company agreed to sell to Mylan
substantially all of the Companys assets related to its Cold-EEZE
cold remedy brand and product line for $50,000,000 (the Asset
Sale).

Following the Asset Sale, the Company will retain ownership of
its manufacturing facility and manufacturing business in Lebanon,
Pennsylvania, and its headquarters in Doylestown, Pennsylvania,
as well as its dietary supplements product lines which are
currently under development. The Company, through its Pharmaloz
subsidiary, will enter into a manufacturing and supply agreement
with Mylan.

The closing of the proposed Asset Sale, which is currently
expected to occur in the first quarter of 2017, is subject to the
approval of the Companys stockholders and other customary closing
conditions. The Purchase Agreement contains customary
representations, warranties and covenants, including customary
non-solicitation, non-competition and confidentiality covenants.
The Purchase Agreement also includes customary provisions
restricting the Company, and its officers, directors and
employees ability to engage in discussions with any third party
regarding alternative sales.

The foregoing description of the Purchase Agreement is a summary
only, does not purport to be complete and is subject to, and
qualified in its entirety by reference, to the Purchase
Agreement, a copy of which will be filed with the Companys
definitive proxy statement to be filed in connection with the
Asset Sale and is incorporated herein by reference. The Purchase
Agreement contains representations and warranties made by the
parties as of specific dates and solely for their benefit. The
representations and warranties reflect negotiations between the
parties and are not intended as statements of fact to be relied
upon by the Companys stockholders or any other person or entity
other than the parties to the Purchase Agreement and, in certain
cases, represent allocation decisions among the parties and are
modified or qualified by correspondence or confidential
disclosures made between the parties in connection with the
negotiation of the Purchase Agreement (which disclosures are not
reflected in the Purchase Agreement itself, may not be true as of
any date other than the date made, or may apply standards of
materiality in a way that is different from what may be viewed as
material by stockholders). Accordingly, the representations and
warranties may not describe the actual state of affairs at the
date they were made or at any other time, and stockholders should
not rely on them as statements of fact. Moreover, information
concerning the subject matter of the representations and
warranties may change after the date of the Purchase Agreement.

Voting Agreement

On January 6, 2017, in connection with the execution of the
Purchase Agreement, the Company and Mylan and each of the
directors and Robert V. Cuddihy, Jr. (solely in their capacity as
stockholders of the Company) entered into a Voting Agreement
(collectively, the Voting Agreements). The shares subject to the
Voting Agreements represent approximately 24.1% of the
outstanding common stock of the Company. The Voting Agreements
generally require that the stockholders party thereto (i) vote
all of their shares of the Companys voting stock in favor of the
Purchase Agreement and all transactions contemplated by the
Purchase Agreement; (ii) vote against any alternative transaction
or third party proposal; (iii) not transfer their shares or
deposit (or permit the deposit of) any of their shares in a
voting trust or grant an proxy or enter into any voting agreement
or similar agreement in contravention of the obligations of the
stockholders under the Voting Agreement; (iv) not take any action
that would constitute a violation of the non-solicitation
provisions of the Purchase Agreement if taken by the Company,
with the limitations and exceptions of such provisions
contemplated thereby that are applicable to the Company or its
board of directors being similarly applicable to the
stockholders. The Voting Agreements terminate upon the first to
occur of (x) the termination of the Purchase Agreement, or (y)
such date and time as transaction becomes effective in accordance
with the terms and provisions of the Purchase Agreement.



The foregoing is a summary of the terms of the Voting Agreements.
Such summary does not purport to be complete and is qualified in
its entirety by reference to the Voting Agreement, which is
attached as Exhibit 4.1 hereto and is incorporated herein by
reference.

Rights Agreement First Amendment

On January 5, 2017, prior to the execution of the Purchase
Agreement, the board of directors of the Company approved an
amendment (the Amendment to Rights Agreement) to the Amended and
Restated Rights Agreement (the Rights Agreement). The Amendment
to Rights Agreement was executed on January 6, 2017, immediately
prior to the execution of the Purchase Agreement.

The Amendment to Rights Agreement renders the Rights Agreement
inapplicable to the Purchase Agreement, the Voting Agreement and
the transactions contemplated thereby. Specifically, the
Amendment to Rights Agreement, among other matters, provides that
none of (i) the approval, execution, delivery, performance or
public announcement of the Purchase Agreement (including any
amendments, modifications or supplements thereto), (ii) the
consummation of the Asset Sale and any other transactions
contemplated by the Purchase Agreement, or (iii) the execution,
delivery or performance of the Voting Agreements described above
will result in Mylan or any of their respective Affiliates or
Associates (as such terms are defined in the Rights Agreement)
being deemed an Acquiring Person.

In addition, the definition of Beneficial Owner under the Rights
Agreement was revised such that it no longer includes beneficial
ownership of securities that may result from the execution,
delivery or performance of the Voting Agreements.

Further, Section 13(i) of the Rights Agreement will not apply to
the Asset Sale or as a result of execution, delivery or
performance of the Voting Agreements, and will not apply to Mylan
as an other Person, provided that neither individual becomes an
Acquiring Person (as such term is defined in the Rights
Agreement).

The foregoing is a summary of the terms of the Amendment to
Rights Agreement. Such summary does not purport to be complete
and is qualified in its entirety by reference to the Amendment to
Rights Agreement, which is attached as Exhibit 4.2 hereto and is
incorporated herein by reference.

ADDITIONAL INFORMATION AND WHERE TO FIND IT

IN CONNECTION WITH THE PROPOSED TRANSACTION, THE COMPANY WILL
FILE WITH THE SECURITIES EXCHANGE COMMISSION (SEC) A DEFINITIVE
PROXY STATEMENT TO BE USED TO SOLICIT STOCKHOLDERS APPROVAL OF
THE TRANSACTION. THE PROPOSED TRANSACTION AND APPROVAL OF THE
ASSET SALE WILL BE SUBMITTED TO THE COMPANYS STOCKHOLDERS FOR
THEIR CONSIDERATION. STOCKHOLDERS ARE URGED TO READ THE
DEFINITIVE PROXY STATEMENT REGARDING THE TRANSACTION WHEN IT
BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE
SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. STOCKHOLDERS
WILL BE ABLE TO OBTAIN A FREE COPY OF THE DEFINITIVE JOINT PROXY
STATEMENT/PROSPECTUS, AS WELL AS OTHER FILINGS CONTAINING
INFORMATION ABOUT THE COMPANY, WITHOUT CHARGE, AT THE SECS
WEBSITE (HTTP://WWW.SEC.GOV). INVESTORS MAY OBTAIN ADDITIONAL
INFORMATION REGARDING THE INTEREST OF SUCH PARTICIPANTS BY
READING THE PROXY STATEMENT REGARDING THE ASSET SALE WHEN IT
BECOMES AVAILABLE. THIS COMMUNICATION DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES OR A SOLICITATION OF ANY VOTE OR APPROVAL.



The Company, its board of directors, executive officers and
employees and certain other persons may be deemed to be
participants in the solicitation of proxies from the Companys
stockholders in connection with the approval of the transaction.

FORWARD-LOOKING STATEMENTS

Except for the historical matters contained herein, statements
contained in this current report on Form 8-K are forward looking
statements and are made to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, including,
without limitation, statements regarding the closing of the Asset
Sale. These forward-looking statements are subject to risks and
uncertainties which may make actual results differ materially
from those expressed or implied in the forward-looking statement,
including, without limitations, the Companys ability to satisfy
the closing conditions set forth in the Purchase Agreement,
including the receipt of the requisite stockholder approval. Any
forward-looking statements relating to the proposed Asset Sale
are based on the Companys current expectations, assumptions,
estimates and projections. The Company assumes no obligation to
update any such forward-looking statements to reflect actual
results, changes in assumptions or changes in other factors
affecting such forward-looking statements.

Item 3.03 Material Modification to Rights of Security
Holders

The information set forth under Item 1.01 of this Current Report
on Form 8-K is incorporated herein by reference.

Item 8.01 Other Events

On January 9, 2017, the Company issued a press release announcing
its agreement to sell the Cold-EEZE brand to Mylan and a press
release announcing an investor conference call on which Ted
Karkus, the Companys Chairman and CEO, will provide an overview
of the Purchase Agreement. Copies of the press releases are
attached as Exhibits 99.1 and 99.2, respectively, and are
incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits

(d) Exhibits

No. Description
4.1 Voting Agreement entered on January 6, 2017, by each of the
Companys executive officers and directors
4.2 Amendment No. 1 to Amended and Restated Rights Agreement, by
and between ProPhase Labs, Inc., and American Stock Transfer
Trust Company, LLC, dated as of January 6, 2017
99.1 Press Release, dated January 9, 2017, entitled ProPhase Labs,
Inc. Announces Agreement to Sell Cold-EEZE Brand
99.2 Press Release, dated January 9, 2017, entitled ProPhase Labs,
Inc. Schedules an Investor Conference Call for Tuesday,
January 10, 2017




About PROPHASE LABS, INC. (NASDAQ:PRPH)

ProPhase Labs, Inc. is a manufacturer, marketer and distributor of a range of homeopathic and health products. The Company is also engaged in the research and development of over-the-counter (OTC) drugs, natural base health products along with supplements, personal care and cosmeceutical products. It is engaged in manufacturing, distributing, marketing and sale of OTC cold remedy products to consumers through national chain, regional, specialty and local retail stores. It also manufactures, markets and distributes an organic cough drop and a Vitamin C supplement, Organix, and performs contract manufacturing services of cough drop, dietary supplements, and other OTC cold remedy products for third parties. Its product pipeline includes Cold-EEZE Cold Remedy QuickMelts and Cold-EEZE Cold Remedy Oral Spray. It also produces Legendz XL for sexual health, Triple Edge XL, which is a daily energy booster plus testosterone support, and Super ProstaFlow Plus for prostate and urinary health.

PROPHASE LABS, INC. (NASDAQ:PRPH) Recent Trading Information

PROPHASE LABS, INC. (NASDAQ:PRPH) closed its last trading session up +0.08 at 2.10 with 269,674 shares trading hands.

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