In consideration Medivir is expected to pay $12 million in cash upon closing of the transaction as well as future milestones of up to $153 million based on the development and commercialization of TetraLogic’s product candidates and earn-out payments which become payable upon achievement of specified annual sales.
The transaction, which was approved by the Board of Directors, is expected to close by the end of the fourth quarter of 2016. Closing is subject to certain conditions, including the approval of TetraLogic’s shareholders and of the holders of TetraLogic’s convertible debt (“Senior Notes”).
In connection with the Sale, the holders of the Senior Notes agreed to exchange $2.2 million in principal amount of the Senior Notes for 12,222,222 shares of newly issued convertible participating series A preferred stock, with certain preferential dividends and liquidation preferences. Following this exchange, approximately $41.5 million in aggregate principal amount of Senior Notes will remain outstanding, plus accrued but unpaid interest on all Senior Notes.
Each share of preferred stock will accrue dividends at the rate of 8%, payable in priority to any dividend or other distribution on the Common Stock. The preferred stock will have voting rights equivalent to one share of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), and will vote on an as-converted basis as a single class with the holders of Common Stock.
The holders of Senior Notes have agreed to vote their shares of preferred stock in support of the Sale. Shareholders of the Company holding approximately 17.48% of the outstanding shares of capital stock entitled to vote have signed voting agreements in support of the Sale. Collectively therefore, holders of shares representing approximately 50.72% of the shares of capital stock entitled to vote will have agreed to vote their shares in favor of the Sale.
Under its agreement with the holders of Senior Notes, the Company has agreed to use the $12 million cash proceeds received at closing of the Sale to redeem $12 million in aggregate principal amount of the Senior Notes then outstanding. The holders of the Senior Notes have also agreed to extend the maturity date of the Senior Notes to June 15, 2024 and to receive interest payments in additional Senior Notes in lieu of cash.
