XML 32 R22.htm IDEA: XBRL DOCUMENT v3.22.2.2
SUBSEQUENT EVENTS
 9 Months Ended
Sep. 30, 2022
Subsequent Events [Abstract]  
SUBSEQUENT EVENTS SUBSEQUENT EVENTS
Expiration of the Cash Exercise Feature of the Unadjusted Series B Warrants
On October 28, 2022, the cash exercise feature of the Unadjusted Series B Warrants expired. Refer to Note 8 for additional information.
Recapitalization
On October 30, 2022, the Company entered into the Recapitalization Agreement with Starboard and the Investors, pursuant to which, among other things, the Company and Starboard agreed to effect the Recapitalization to restructure Starboard’s existing investments in the Company in order to simplify the Company’s capital structure.
Under the Recapitalization Agreement, the Company and Starboard agreed to take certain actions in connection with the Recapitalization, including, among other things, the following:
•Series A Redeemable Convertible Preferred Stock. Subject to the receipt of stockholder approval at the Company’s next annual meeting of stockholders, (i) the Company will use its reasonable best efforts to cause the Certificate of Designations to be amended and restated in the form attached to the Recapitalization Agreement in order to remove the “4.89% blocker” provision and (ii) on or prior to July 14, 2023, the Investors will convert an aggregate amount of 350,000 shares of Series A Redeemable Convertible Preferred Stock into common stock in accordance with the terms of the Certificate of Designations.
•Series A Warrants. In accordance with the terms of the Recapitalization Agreement, within five (5) business days following the date of the Recapitalization Agreement, (i) the Investors were obligated to irrevocably exercise all of the Series A Warrants for cash and (ii) the Company was obligated to subsequently issue to the Investors shares of common stock in accordance with the terms of the Series A Warrants and pay to Starboard an aggregate amount of $9,000,000 representing a negotiated settlement of the foregone time value of the Series A Warrants (which amount will be paid through a reduction in the exercise price of the Series A Warrants). Effective as of November 1, 2022, the Investors exercised the Series A Warrants in full and the Company issued an aggregate of 5,000,000 shares of the Company’s common stock to the Investors in consideration of their payment of the cash exercise price of $9,250,000, which amount represents a reduction in the exercise price of $1.80 to account for a negotiated settlement by the parties to account for the forgone time value of money of the Series A Warrants.
•Series B Warrants. On or prior to July 14, 2023 (unless stockholder approval is required), the Company and Starboard will amend the Series B Warrant Agreement to remove the 4.89% blocker, and Starboard will irrevocably exercise 31,506,849 of the Series B Warrants (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction relating to the common Stock occurring after the date of the Recapitalization Agreement), through a Note Cancellation (as defined in the Series B Warrants) or a combination of a Note Cancellation and a Limited Cash Exercise (as defined in the Series B Warrants) in accordance with the terms of the Series B Warrants, as determined by Starboard (the “Series B Warrants Exercise”). The remaining Series B Warrants will be cancelled immediately following the completion of the Rights Offering (as defined below).
•Rights Offering. The Company will launch a rights offering in accordance with the terms of the Series B Warrants (the “Rights Offering”) pursuant to which each holder of the Company’s common stock will receive the right to purchase (a “Purchase Right”) one share of common stock at $5.25 per share (the “Rights Exercise Price”) for every four (4) shares of common stock held by such holder (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction relating to the common Stock occurring after the date of the Recapitalization Agreement), and each Investor will receive an equivalent right in accordance with the terms of the Series B Warrants. The Investors will receive rights to purchase approximately 25,000,000 shares of common stock and have committed to purchase a minimum of 15,000,000 shares in the Rights Offering (as adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction relating to the common Stock occurring after the date of the Recapitalization Agreement). In addition, concurrently with the Rights Offering, each of the Investors holding Series A Convertible Preferred Stock shall have the right to purchase from the Company a number of shares of Common Stock equal to 25% times the number of shares of Common Stock issuable upon conversion of such Series A Convertible Preferred Stock at a price equal to the Rights Exercise Price, which purchase rights shall expire at the same time as the Purchase Rights.
•Recapitalization Payment. At the closing of the Series B Warrants Exercise (the “Closing”), the Company will pay to Starboard an aggregate amount of $66,000,000 (the “Recapitalization Payment”) representing a negotiated settlement of the foregone time value of the Series B Warrants and the Series A Redeemable Convertible Preferred Stock (which amount will be paid through a reduction in the exercise price of the Series B Warrants). If stockholder approval for the amendment to the Certificate of Designations to remove the “4.89% blocker” provision is not obtained, the Recapitalization Payment will be reduced by $12,700,000.
•Governance. Under the Recapitalization Agreement, the parties agreed that for a period from the date of the Recapitalization Agreement until May 12, 2026 (the “Applicable Period”), the Board will include at least two (2) directors that are independent of, and not affiliates (as defined in Rule 144 under the Securities Act of 1933, as amended) of, Starboard, with current Board members Maureen O’Connell and Isaac T. Kohlberg satisfying this initial condition. The parties also agreed that Katharine Wolanyk will continue to serve as a director of the Company until at least May 12, 2024 (or such earlier date if Ms. Wolanyk is unwilling or unable to serve as a director for any reason or resigns as a director). Additionally, within five (5) business days following the date of the Recapitalization Agreement, the Company agreed to take all necessary action to appoint Gavin Molinelli as a Board member and as Chair of the Board, which appointment was effected on October 30, 2022. The Company and Starboard also agreed that, following the Closing until the end of the Applicable Period, the number of directors serving on the Board will not exceed ten (10) members.
•Fair Price Provision. The Recapitalization Agreement includes a “fair price” provision requiring, in addition to any other stockholder vote required by the Company’s Certificate of Incorporation or Delaware law, the affirmative vote of the holders of a majority of the outstanding voting stock held by stockholders of the Company other than Starboard and its affiliates, by or with whom or on whose behalf, directly or indirectly, a business combination is proposed, in order to approve such a business combination; provided, that the additional majority voting requirement would not be applicable if either (x) the business combination is approved by the Board by the affirmative vote of at least a majority of the directors who are unaffiliated with Starboard or (y) (i) the consideration to be received by stockholders other than Starboard and its affiliates meets certain minimum price conditions, and (ii) the consideration to be received by stockholders other than Starboard and its affiliates is of the same form and kind as the consideration paid by Starboard and its affiliates.
The consummation of the Series B Warrant Exercise is subject to certain conditions, including: (i) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; (ii) the absence of any law or order prohibiting the consummation of the Series B Warrant Exercise; (iii) the representations and warranties of the Company and Starboard being true and correct, subject to the materiality standards contained in the Recapitalization Agreement; and (iv) the Company and Starboard having complied in all material respects with their respective obligations under the Recapitalization Agreement. Additionally, solely to the extent that the Company reasonably determines in good faith that a stockholder vote is required in connection with the Rights Offering under applicable Nasdaq rules, the requisite stockholder approval for any such transaction shall have been obtained. If stockholder approval is required, the timing of the proposed Rights Offering may change.
The Recapitalization Agreement may be terminated by either party under certain circumstances, including if (i) the parties agree to terminate by mutual consent, (ii) a governmental entity issues an order permanently prohibiting the Recapitalization, (iii) there is an uncured breach of the Recapitalization Agreement by the other party that results in a condition to Closing not being capable of being satisfied, or (iv) the Closing does not occur on or before July 31, 2023.
Under the Recapitalization Agreement, at its next annual meeting of Stockholders, the Company is required to use its reasonable best efforts to obtain the requisite stockholder approval for an amendment to the Certificate of Designations. Additionally, if the Company reasonably determines in good faith that all or any portion of the transactions contemplated in connection with the Rights Offering require stockholder approval under the applicable Nasdaq rules, the Company will be required to use its reasonable best efforts to obtain the requisite stockholder approval of any such transaction.
The Recapitalization Agreement also provides that, effective as of the later of the Closing and the date on which no Notes remain outstanding, (i) the Securities Purchase Agreement and (ii) that certain Governance Agreement, dated as of November 18, 2019, as amended and restated on January 7, 2020, shall be automatically terminated and of no further force and effect without any further action by any party thereto.