Item 1.01 Entry into a Material Definitive Agreement.
As previously reported, on July 29, 2022, First Wave BioPharma, Inc., a Delaware corporation ("the Company"), entered into a binding term sheet (the "Term Sheet") with Fortis Advisors LLC, the hired representative (in such capacity, the "Representative") of the former stockholders of First Wave Bio, Inc. ("FWB"), settling the previously disclosed complaint filed by the Representative against the Company (the "FWB Action") in the Court of Chancery in the State of Delaware (the "Court") and restructuring the Company's obligations to the former FWB shareholders. Plastic Bags
Pursuant to the Term Sheet, the Company had previously paid the former stockholders of FWB $1.5 million in cash on July 29, 2022 (the "Upfront Payment") and on September 9, 2022, the Company had previously paid the former stockholders of FWB an additional $1.0 million in cash (the "Second Payment"). Pursuant to the Term Sheet, in consideration of the Second Payment, the Representative caused its counsel to execute and file a stipulation of dismissal dismissing the FWB Action with prejudice with the Court. Upon payment of the Second Payment, approximately $12.5 million of fixed payment obligations owed to the former FWB shareholders was extinguished.
Pursuant to the Term Sheet, the Company and the Representative agreed to use their respective commercially reasonable efforts to negotiate a settlement agreement embodying the terms contained in the Term Sheet. Effective November 30, 2022, the Company, the Representative and certain individuals entered into a settlement agreement (the "Settlement Agreement").
Pursuant to the Settlement Agreement, on November 30, 2022, the Company paid the final $2.0 million installment to the former stockholders of FWB as required by the Term Sheet and the Settlement Agreement (the "Final Payment".
Under the Settlement Agreement, the former stockholders of FWB are entitled to receive future cash payments conditioned on the achievement of certain development milestones for adrulipase and to a percentage of any consideration received by the Company, its subsidiaries and/or the Company's stockholders in the event of a license, sale or other specified transaction relating to adrulipase, subject to a cap. The former stockholders of FWB are also entitled receive a percentage of the consideration received by the Company, its subsidiaries and/or the Company's stockholders in the event of a license, sale or other specified transaction relating to niclosamide and will retain their existing milestone payment rights with respect to niclosamide. In the event that the consideration received by the Company in connection with an adrulipase transaction or a niclosamide transaction consists of securities or other non-cash consideration or the transaction is with an affiliate of the Company, the Representative will have the right to elect either to receive payment for the former stockholders of FWB in such form of consideration or to cause the licensee or acquirer to assume the obligations described in this paragraph. In addition, the Company's obligation to use commercially reasonable efforts to develop niclosamide will be deferred for a period of 24 months from the date of the Term Sheet.
In the event of a "Company Sale" (as defined in the Settlement Agreement), the former stockholders of FWB are entitled to receive a pro rata share of the total consideration received by the Company, its subsidiaries and/or the Company's stockholders up to $4.0 million based on a formula set forth in the Settlement Agreement. Additionally, in the event of a "Company Sale", if any of the milestone payments described in the preceding paragraph have not yet occurred or been paid, the obligations of the Company to make such payments upon the subsequent occurrence of such milestone events will survive the "Company Sale" and will be assumed by any successor, acquirer or surviving company in such "Company Sale". In certain circumstances, the former stockholders of FWB have the right to treat a "Company Sale" as a sale of ardulipase or niclosamide, as applicable, and to treat the Company Sale as a sale of the related asset and the former stockholders of FWB are to receive the consideration with respect thereto described in the preceding paragraph.
The foregoing descriptions of the Term Sheet and the Settlement Agreement are summaries only, do not purport to be complete and are qualified in their entirely by reference to the full text of the Term Sheet previously filed as Exhibit 10.1 to the Company's Current Report on Form 8-K previously filed with the Securities and Exchange Commission on July 29, 2022 and to the full text of the Settlement Agreement filed herewith as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
† Certain portions of this exhibit, that are not material and would likely cause competitive harm to the registrant if publicly disclosed, have been redacted pursuant to Item 601(b)(10) of Regulation S-K.
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