Item 1.01
Entry Into a Material Definitive Agreement.
On December 17, 2018, ReShape Lifesciences Inc. (the Company) entered into an Asset Purchase Agreement (the Purchase Agreement) with Apollo Endosurgery, Inc. (Apollo) pursuant to which the Company acquired from Apollo substantially all of the assets exclusively related to Apollos Lap-Band product line and Apollo acquired from the Company substantially all of the assets exclusively related to the Companys ReShape Balloon product line. In addition, the Company agreed to pay Apollo $17 million in cash, of which $10 million was paid at the closing of the transaction, $2 million is payable on the first anniversary of the closing date, $2 million is payable on the second anniversary of the closing date, and $3 million is payable on the third anniversary of the closing date. The Lap-Band system is designed to provide minimally invasive long-term treatment of severe obesity and is an alternative to more invasive surgical stapling procedures such as the gastric bypass or sleeve gastrectomy.
The Company and Apollo have made customary representations, warranties, covenants and indemnities in the Purchase Agreement. Subject to certain limitations, each of the Company and Apollo have agreed to indemnify the other party for certain matters, including breaches of representations, warranties and covenants in the Purchase Agreement.
In connection with the Purchase Agreement, the Company and Apollo entered into a Security Agreement pursuant to which the Company granted to Apollo a security interest in substantially all of the assets of the Company as security for the Companys obligations under the Purchase Agreement, including its obligation to pay the cash purchase price. The security interest will be terminated upon the earlier of the date the Company pays the cash purchase price to Apollo in full or completes an equity financing raising gross proceeds of at least $15 million.
In addition, the Company and Apollo have entered into a transition services agreement, supply agreement and distribution agreement pursuant to which, among other things, Apollo will manufacture the Lap-Band product for the Company for up two years and Apollo will serve as the Companys distributor of the Lap-Band product outside of the United States for up to one year.
The foregoing description of the Purchase Agreement and Security Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Purchase Agreement and Security Agreement, which are filed as Exhibit 2.1 and Exhibit 10.1, respectively, to this report and are incorporated herein by reference. The Purchase Agreement and related description are intended to provide you with information regarding the terms of the Purchase Agreement and are not intended to modify or supplement any factual disclosures about the Company in its reports filed with the Securities and Exchange Commission (the SEC). In particular, the Purchase Agreement and related description are not intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to the Company. The representations and warranties also may be subject to a contractual standard of materiality different from those generally applicable under the securities laws. Stockholders of the Company are not third-party beneficiaries under the Purchase Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Apollo or any of their respective assets, subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the Purchase Agreement.