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Item 1.01
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Entry into a Material Definitive Agreement.
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General
On
March 15, 2021, Intec Pharma Ltd., an Israeli company (the “Company” or “Intec Israel”), Intec Parent,
Inc., a Delaware corporation (“Intec Parent”), Dillon Merger Subsidiary, Inc., a Delaware corporation and a wholly
owned subsidiary of Intec Parent (the “Merger Sub”), Domestication Merger Sub Ltd., an Israeli company and a wholly-owned
subsidiary of Intec Parent (the “Domestication Merger Sub”), and Decoy Biosystems, Inc., a Delaware corporation (“Decoy”),
entered into an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), pursuant to which, following
the merger of the Domestication Merger Sub with and into Intec Israel, with Intec Israel being the surviving entity and a wholly-owned
subsidiary of Intec Parent (the “Domestication Merger”), and upon satisfaction of additional closing conditions, the
Merger Sub will merge with and into Decoy, with Decoy being the surviving entity and a wholly-owned subsidiary of Intec Parent
(the “Merger”). The Merger is expected to be completed in the third calendar quarter of 2021 and if it is completed
then the business of Decoy will become the business of Intec Parent.
The Merger
Agreement
The
Merger
As set forth in the
Merger Agreement, after completion of the Domestication Merger and subject to other closing conditions of the Merger, on the closing
date (the “Closing Date”), the Merger Sub will merge with and into Decoy, with Decoy being the surviving entity. As
a result of the Merger, Decoy will become a wholly-owned subsidiary of Intec Parent.
Subject
to the terms and conditions of the Merger Agreement, at the effective time of the Merger, which shall occur on the Closing Date
(the “Effective Time”), (i) each outstanding share of Decoy common stock, par value $0.001 per share (the “Decoy
Common Stock”) (other than any shares held as treasury stock (which will be cancelled) and any dissenting shares and after
giving effect to the conversion of Decoy SAFEs (Simple Agreements for Future Equity) and Decoy preferred stock into Decoy Common
Stock) will be converted into shares of Intec Parent common stock, par value $0.01 per share (“Intec Common Stock”),
based on the exchange ratio as described below, and (ii) each outstanding and unexercised Decoy stock option, whether vested or
unvested, will be converted into a stock option exercisable for that number of shares of Intec Parent Common Stock equal to the
product of (x) the aggregate number of shares of Decoy Common Stock for which such stock option was exercisable and (y) the exchange
ratio. The shares of Intec Parent Common Stock issuable in exchange for shares of Decoy Common Stock as described above are referred
to as the “Merger Shares.”
Under
the exchange ratio formula in the Merger Agreement, without taking into consideration the effect of the respective levels of cash
and liabilities of each of the Company and Decoy, which will result in an adjustment to such exchange ratio, following the closing
of the Merger (the “Closing”), the former Decoy securityholders immediately before the Merger are expected to own approximately
75% of the aggregate number of the outstanding securities of Intec Parent, and the securityholders of the Company immediately before
the Domestication Merger are expected to own approximately 25% of the aggregate number of the outstanding securities of Intec Parent,
calculated on a fully-diluted basis. The actual allocation will be subject to adjustment based on, among other things, Decoy’s
and the Company’s net cash balance (including, in the case of the Company, any proceeds from any disposition of the Company’s
Accordion Pill business), subject to certain exceptions. As further described below, the Closing is also conditioned on completion
of the Domestication Merger and on a financing by the Company or Intec Parent, which will dilute securityholders of both the Company
and Decoy on a pro-rata basis.
Following
the Closing, Jeffrey Meckler will serve as Intec Parent’s Chief Executive Officer, Michael Newman will serve as Intec Parent’s
Chief Scientific Officer, Nir Sassi will serve as Intec Parent’s Chief Financial Officer, and Walt Linscott will serve as
Intec Parent’s Chief Business Officer. Additionally, following the Closing, the board of directors of Intec Parent is expected
to initially consist of eight directors and will be comprised of (i) five (5) members designated by the Company and (ii) three
(3) members designated by Decoy.
The
Merger Agreement contains customary representations, warranties and covenants made by each of the Company and Decoy, including
covenants relating to (i) the conduct of their respective businesses prior to the Closing, (ii) the preparation and filing of a
registration statement on Form S-4 registering the Merger Shares and the shares of Intec Parent Common Stock to be issued in connection
with the Domestication Merger (the “Registration Statement”) and the preparation and/or filing, as applicable, of a
proxy statement/information statement for the special meeting or approval by written consent, as applicable, of shareholders of
each of the Company and Decoy, (iii) holding a meeting or approval by written consent, as applicable, of shareholders of each of
the Company and Decoy to obtain their requisite approvals in connection with the Domestication Merger and Merger, as applicable,
including, among other approvals, the approval by the Company’s shareholders of the issuance of the Merger Shares, and (iv)
subject to certain exceptions, the recommendation of the board of directors of each party to the Merger Agreement to its shareholders
that such approvals be given.
Consummation
of the Merger is subject to certain closing conditions, including, among other things, (i) consummation of the Domestication Merger,
(ii) approval of certain matters related to the Merger by the shareholders of the Company and approval of the Merger by the stockholders
of Decoy, (iii) the effectiveness of the Registration Statement, (iv) the continued listing of the Company’s ordinary shares
on the Nasdaq Capital Market (and following the Domestication Merger, the shares of Intec Parent Common Stock) and the authorization
for listing on the Nasdaq Capital Market of the Merger Shares, (v) the receipt of a tax ruling from the Israel Tax Authority with
respect to the Domestication Merger, (vi) disposition of the Company’s Accordion Pill business, as further described below,
and (vii) a closing financing by the Company or Intec Parent such that upon Closing of the Merger (taking account of the proceeds
to be received with respect to such financing), the combined net cash of Intec Parent shall be not less than $30 million and not
more than $50 million, and which represents an agreed minimum valuation derived from the Exchange Ratio for Intec Parent following
the Closing. The Merger Agreement requires the Company to convene a shareholders’ meeting for purposes of obtaining the necessary
shareholder approvals required in connection with the Merger.
The
Merger Agreement contains certain termination rights for both the Company and Decoy, including, but not limited to, the right of
the Company and Decoy to terminate the Merger Agreement by mutual written consent or if a court of competent jurisdiction or other
Governmental Body (as defined in the Merger Agreement) has issued a final and nonappealable order, decree or ruling, or has taken
any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger. In addition, either
the Company or Decoy may terminate the Merger Agreement if the Merger is not consummated on or before the date that is 155 days
following the delivery of the Decoy audited financial statements for the fiscal years ended December 31, 2020 and 2019, which date
may be extended in certain circumstances. In connection with the termination of the Merger Agreement, under specified circumstances,
Decoy may be required to pay to the Company a break-up fee of $1,000,000, or the Company may be required to pay to Decoy a reverse
break-up fee of $1,000,000 and forfeit a deposit in the amount of $350,000 in favor of Decoy to cover transaction expenses.
Certain Agreements
Related to the Merger
The
Domestication Merger
As
set forth in the Merger Agreement, prior to the date of the Closing Date, Intec Israel shall re-domesticate as a Delaware corporation
by merging with and into the Domestication Merger Sub, with Intec Israel surviving the merger and becoming a wholly-owned subsidiary
of Intec Parent. In connection with the Domestication Merger, all Intec Israel ordinary shares, having no par value per share (the
“Intec Israel Shares”), outstanding immediately prior to the Domestication Merger, will convert, on a one-for-one basis,
into shares of Intec Parent Common Stock and all options and warrants to purchase Intec Israel Shares outstanding immediately prior
to the Domestication Merger will be exchanged for equivalent securities of Intec Parent.
Disposition
of Accordion Pill Business
In
accordance with the terms of the Merger Agreement, the Company agreed that prior to the Closing Date it would use commercially
reasonable efforts to enter into one or more agreements providing for the sale, transfer or assignment, or that it would otherwise
take steps related to the divestment or disposal and satisfaction of liabilities of, the Company’s Accordion Pill business,
to be effected immediately after the Closing.
Support
Agreements
In
connection with the execution of the Merger Agreement, certain shareholders of Decoy entered into support agreements with the Company,
Intec Parent and Merger Sub covering approximately 74% of the outstanding shares of Decoy relating to the Merger (the “Decoy
Stockholder Support Agreements”). The Decoy Stockholder Support Agreements provide, among other things, that the stockholders
party to the Decoy Stockholder Support Agreements will vote all of the shares of Decoy held by them: (i) in favor of the adoption
of the Merger Agreement, the approval of the Merger and the other transactions contemplated by the Merger Agreement, provided that
they will vote such shares in the same manner as the vote in respect of the Merger Agreement and the Merger of the holders of a
majority of the outstanding shares of Decoy’s capital stock who do not sign a Decoy Stockholder Support Agreement, and (ii)
against any adverse proposal, for up to eighteen (18) months following the date of the Decoy Stockholder Support Agreements (depending
on the manner of termination of the Merger Agreement).
In
accordance with the terms of the Merger Agreement, the officers and directors of the Company have each entered into support agreements
with Decoy relating to the Merger (the “Intec Shareholder Support Agreements”). The Intec Shareholder Support Agreements
provide, among other things, that the officers and directors party to the Intec Shareholder Support Agreements will vote all of
the ordinary shares of the Company held by them: (i) in favor of the adoption of the Merger Agreement, the approval of the Merger
and the other transactions contemplated by the Merger Agreement, and (ii) against any adverse proposal.
Lock-Up
Agreements
In
accordance with the terms of the Merger Agreement, certain stockholders of Decoy and the officers and directors of Intec have each
entered into a lock-up agreement with the Company, Intec Parent and Decoy (collectively, the “Lock-Up Agreements”).
The Lock-Up Agreements place certain restrictions on the transfer of shares of common stock of Intec Parent held by the respective
signatories thereto for 180 days after the Closing Date.
The
preceding summaries do not purport to be complete and are qualified in their entirety by reference to the Merger Agreement, the
form of Decoy Stockholder Support Agreement, the form of Intec Shareholder Support Agreement and the form of Lock-Up Agreement,
which are filed as Exhibits 2.1, 10.1, 10.2 and 10.3, respectively, and which are incorporated herein by reference. The Merger
Agreement has been attached as an exhibit to this Current Report on Form 8-K to provide investors and securityholders with information
regarding its terms. It is not intended to provide any other factual information about the Company or Decoy or otherwise to modify
or supplement any factual disclosures about the Company in its public reports filed with the Securities and Exchange Commission
(the “SEC”). The Merger Agreement includes representations, warranties and covenants by each of the Company and Decoy
made solely for the purpose of the Merger Agreement and solely for the benefit of the parties thereto in connection with the negotiated
terms of the Merger Agreement. Investors should not rely on the representations, warranties and covenants in the Merger Agreement
or any descriptions thereof as characterizations of the actual state of facts or conditions of the Company, Decoy or any of their
respective affiliates, as certain of those representations and warranties may not be accurate or complete as of any specified date,
may be subject to a contractual standard of materiality different from those generally applicable to SEC filings, may be subject
to exceptions made in confidential disclosure schedules which have not been filed herewith, or may have been used for purposes
of allocating risk among the parties to the Merger Agreement rather than to establish matters of fact.