Form 8-K for HARBOR BIOSCIENCES, INC.
3-Aug-2011
Entry into a Material Definitive Agreement, Unregistered Sale of Equity
Item 1.01. Entry into a Material Definitive Agreement.
Series A Preferred Stock Purchase Agreement
On July 28, 2011, the Company entered into the Purchase Agreement with the Investor, pursuant to which the Company sold the Investor an aggregate of 2,000,000 shares of its Series A Preferred Stock, and the Investor agreed to place $2.825 million in cash into escrow, which, pursuant to the terms and conditions of the Purchase Agreement, will be released to the Company to pay certain Company related expenses as described below as well as to fund the Company's working capital needs under certain circumstances described below. The escrow into which the $2.825 million in cash has been deposited is governed by the terms of an escrow agreement (the "Escrow Agreement") among the Company, the Investor and The Bank of New York Mellon, as escrow agent (the "Escrow Agent").
In connection with the execution of the Purchase Agreement, the Company and the Investor entered into the Stockholders Agreement and an expenses fee letter (the "Expenses Fee Letter"), the Company, the Investor and the Escrow Agent entered into the Escrow Agreement, the Company and the Rights Agent entered into a Second Amended and Restated Rights Agreement, the Company adopted and filed a Certificate of Designations, Preferences and Rights of Series A Preferred Stock (the "Certificate of Designations"), which sets forth the rights, preferences and privileges associated with the Preferred Shares and the Company adopted the Amended and Restated Bylaws. Each of the foregoing documents is described in greater detail below.
Stockholders Agreement
In connection with the execution of the Purchase Agreement, the Company and the Investor entered into the Stockholders Agreement pursuant to which the Investor was granted certain rights which are summarized below.
Put Right. Following the date of closing of the sale of the Preferred Shares and until the later to occur of (x) July 28, 2012 and (y) in the event a Qualifying Transaction has not been consummated, forty-five calendar days following the Company's 2012 annual meeting of stockholders, the Investor may elect to put all (but not less than all) of the Preferred Shares held by it to the Company (the "Put Right"), and the Company will be obligated to purchase such Preferred Shares in exchange for $1.00 and the return of all cash and any other property or assets that continues to be held in the escrow account, in the event of any of the following:
? (i) The Investor has requested in writing that the Company terminate the registration (the "12(g) Termination") of the Common Stock under
Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act") and within five days after such request the Company has not filed a Form 15 to effect the 12(g) Termination, or (ii) the Investor has requested in writing, at any time following the effective date, if any, of the Reverse Stock Split, that the Company effect a termination of the registration of the Common Stock under Section 12(g) of the Exchange Act and the suspension of the Company's reporting obligations under Section 15(d) of the Exchange Act (the "Deregistration") and within five days after such request the Company has not effected the Deregistration (subject to any applicable waiting periods);
? The stockholders of the Company fail to approve any of (i) the NOL Provision, (ii) the Reverse Stock Split, or (iii) the Forward Stock Split, in each case by November 5, 2011;
? (i) The Investor shall have brought to the Board a Qualifying Transaction, and a majority of the Company's disinterested directors fail to recommend and approve the Qualifying Transaction within forty-five calendar days thereafter (a "Qualifying Transaction Proposal") or (ii) such Qualifying Transaction is not consummated within seventy-five calendar days of the Investor having made a Qualifying Transaction Proposal, unless, in the case of clause (ii), the failure to consummate such Qualifying Transaction within such seventy-five calendar day period is due to the Investor's breach in any material respect of its obligations under the definitive agreements providing for the Qualifying Transaction;
? The Company has not appointed to the Board three nominees of the Investor (the "Stockholder Directors") within five calendar days of the receipt by the Company of a written request from the Investor with respect to such appointment;
? Less than three Stockholder Directors are members of the Board following the Company's 2011 stockholders meeting (the "2011 Stockholders Meeting");
? The Investor requests in writing, at any time following the approval of the Reverse Stock Split and the Forward Stock Split by the stockholders of the Company, that the Company effect the Reverse Stock Split and Forward Stock Split and within two business days after such request the Company shall not have filed the amendments to the Company's then-existing certificate of incorporation, relating to the Reverse Stock Split and the Forward Stock Split with the Delaware Secretary of State;
? The occurrence of an "ownership change" as defined in Section 382 of the Internal Revenue Code;
? At any time following the Deregistration, the Company makes any filing . . .
Item 3.02. Unregistered Sales of Equity Securities.
The information set forth in Item 1.01 of this Current Report on Form 8-K regarding the issuance and sale of the Preferred Shares is hereby incorporated into this Item 3.02 by reference.
Item 3.03. Material Modification to Rights of Security Holders.
The rights of holders of the rights issued under the Prior Rights Agreement were modified as a result of the adoption of the Amended Rights Agreement. The information set forth in Item 1.01 of this Current Report on Form 8-K relating to the Amended Rights Agreement is incorporated herein by this reference.
The rights of the Investor with respect to the Preferred Shares were established by the filing of the Certificate of Designations. The information set forth in Item 5.03 of this Current Report on Form 8-K relating to the Certificate of Designations is incorporated herein by this reference.
The rights of holders of the outstanding shares of the Company's capital stock were modified by the adoption of the Amended and Restated Bylaws (as defined below). The information set forth in Item 5.03 of this Current Report on Form 8-K relating to the Amended and Restated Bylaws is incorporated herein by this reference.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
Certificate of Designations of Series A Preferred Stock
In connection with the execution of the Purchase Agreement and the authorization, issuance and delivery of the Preferred Shares, the Board approved, and on July 28, 2011 the Company filed, the Certificate of Designations, which provides that (i) any dividends or distributions made to the holders of Common Stock will also be made to the holders of Preferred Shares on a pari passu basis and based on the number of shares of Common Stock into which the Preferred Shares could then be converted; (ii) in any liquidation, dissolution or winding-up of the Company the entire assets and funds of the Company legally available for distribution will be distributed ratably among the holders of the Common Stock and Preferred Shares pro rata and on a pari passu basis provided that the holders of the Preferred Shares will be deemed to hold that number of shares of Common Stock into which such Preferred Shares are then convertible; (iii) the Preferred Shares outstanding together will (A) be entitled to a number of votes equal to 38.28% of the total number of votes entitled to be cast by holders of all shares of the Company's capital stock voting together as single class, (B) be entitled to vote on all matters on which the holders of Common Stock shall be entitled to vote, in the same manner and with the same effect as the holders of Common Stock, including with respect to election of directors, and (iv) provides that the Preferred Shares will be convertible into Common Stock in the event that the Investor elects to contribute shares of Common Stock to the Company pursuant to Section 8.3 of the Stockholders Agreement to avoid having the Company issue new shares of Common Stock to a stockholder other than the Investors (the initial conversion rate is set at seven shares of Common Stock to one Preferred Share).
The foregoing description of the Certificate of Designations is not complete and is qualified by reference to the full text of the Certificate of Designations, which is attached as an exhibit to this Current Report on Form 8-K, and is incorporated herein by reference.
Amended and Restated Bylaws
In connection with the execution of the Purchase Agreement, on July 28, 2011 the Board approved the amendment and restatement of the Company's Bylaws (the "Amended and Restated Bylaws"). The Amended and Restated Bylaws effect the following changes:
? Adding a provision prohibiting and declaring void any proposed transfer of securities that would result in any stockholder of the Company becoming a "five percent shareholder" as such term is defined by Section 382 of the Internal Revenue Code;
? Special meetings of the stockholders may be called by written request of the holders of at least 25% of the voting power of all of the then-outstanding shares of voting stock of the Company entitled to vote at an election of directors;
? Removal of the provision that prevents stockholders from acting by written consent;
? Elimination of a provision that classified the Board, pursuant to which provision the Board is divided into three separate classes, with each class having a three-year term, and instead providing for a single class of directors, each elected to hold office until the next annual meeting of stockholders;
? Providing that, except for any special rights provided to the holders of preferred stock, directors shall be elected by a plurality of the votes cast at annual meetings of stockholders;
? Providing that certain vacancies on the Board be filled by the affirmative vote of a majority of the directors then in office or majority of the voting power of all of the then-outstanding shares of voting stock of the Company entitled to vote at an election of directors;
? Elimination of the restrictions on the stockholders' ability to remove directors without cause;
? Elimination of a provision specifying certain of the rights and responsibilities of an executive committee of the Board; and
? Permitting the Bylaws to be amended by the vote of a majority of the then outstanding shares of voting stock of the Company, rather than 66-2/3% of such shares.
Certain of the changes that are being made as a result of the approval of the Amended and Restated Bylaws may not actually be implemented because the matters addressed by such changes may also be covered by the Current Certificate, and the relevant provisions of the Current Certificate will not be similarly changed if and until the Company's stockholders approve, and the Company files with the Delaware Secretary of State, the New Certificate. The foregoing description of the Amended and Restated Bylaws is not complete and is qualified by reference to the full text of the Amended and Restated Bylaws, which is attached as an exhibit to this Current Report on Form 8-K, and is incorporated herein by reference.
Where You Can Find Additional Information About the Pending Stockholders Meeting
The Company will file the Proxy Statement and other relevant documents concerning the matters to be voted upon at the 2011 Stockholders Meeting, including the adoption of the New Certificate, the approval of the potential Reverse Stock Split and the approval of the potential Forward Stock Split. Before making any voting decision, investors are urged to read the Proxy Statement when it becomes available and any other relevant documents filed with the SEC because they will contain important information. You will be able to obtain the documents free of charge at the website maintained by the SEC at www.sec.gov. In addition, you may obtain documents filed with the SEC free of charge by requesting them in writing from Harbor BioSciences, Inc., 9191 Towne Centre Drive, Suite 409, San Diego, California 92122, Attention: Chief Financial Officer.
The Company's directors and executive officers, as well as the Investor, may be deemed to be participants in the solicitation of proxies from the Company's stockholders in connection with the 2011 Stockholders Meeting and the related stockholder proposals. Information about the directors and executive officers of the Company, as well as the Investor, including their respective ownership of the Company's capital stock, will be included in the Proxy Statement relating to the 2011 Stockholders Meeting. Investors may obtain additional information regarding the interests of such participants by reading the Proxy Statement when it becomes available.
Cautionary Note Regarding Forward Looking Statements
The foregoing statements regarding the effect of the sale of the Preferred Shares on the Company, the ability of the Company to effect a Qualifying Transaction, the timing and results of the Stockholders Meeting, the ability of the Company to effect the potential Reverse Stock Split or potential Forward Stock Split, the adoption of the New Certificate and certain other statements made in this Current Report on Form 8-K are "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Reform Act of 1995. The forward-looking statements are based on information available to the Company as of the date of this Current Report and management's views and assumptions regarding future events as of the date of this Current Report and are subject to risks and uncertainties which could cause the outcome of future events to differ materially from those assumed or intended. Such potential risks and uncertainties include, but are not limited to, risks associated with (i) holding the 2011 Stockholders Meeting and obtaining the requisite vote of the Company's stockholders to approve the various proposals to be considered at the 2011 Stockholders Meeting, (ii) identifying and closing a Qualifying Transaction within a limited period of time, and (iii) the Investor exercising the Put Right under the Purchase Agreement resulting in the remaining escrow funds being returned to the Investor. Additional risks and uncertainties include those described in the Company's Form 10-K for the fiscal year ended December 31, 2010, which was filed with the SEC and other risks and uncertainties detailed from time to time in the Company's other reports filed with the SEC. The Company urges all interested parties to read these reports to gain a better understanding of the many business and other risks that the Company faces. The Company expressly disclaims any intent or obligation to update any forward looking statements, whether as a result of new information, future events or otherwise, after the date of this Current Report to conform such statements to actual results or to changes in the Company's opinions or expectations except as required by applicable law.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
3.1 Certificate of Designation of Series A Preferred Stock, as filed by the Company with the Delaware Secretary of State on July 28, 2011
3.2 Amended and Restated Bylaws
4.1 Second Amended and Restated Rights Agreement, dated July 29, 2011 between the Company and American Stock Transfer and Trust Company, LLC, as rights agent, which includes as Exhibit A thereto the Amended and Restated Certificate of Designations of the Series B Junior Participating Preferred Stock, as Exhibit B thereto a revised Form of Right Certificate, and as Exhibit C thereto a revised Summary of Rights to Purchase Preferred Shares
10.1 Stock Purchase Agreement, dated July 28, 2011, by and between the Company
and the Investor
10.2 Stockholders Agreement, dated July 28, 2011, by and between the Company
and the Investor
