asxc20240623_prem14a.htm

Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

 

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.         )

 

Filed by the Registrant ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material under §240.14a-12

 

Asensus Surgical, Inc.


(Name of Registrant as Specified In Its Charter)

 

 


(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

No fee required.

Fee paid previously with preliminary materials.

Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11

 

 

PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION, DATED JUNE 24, 2024

 

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Asensus Surgical, Inc.
1 TW Alexander Drive
Suite 160
Durham, North Carolina 27703

 

      , 2024

 

To the stockholders of Asensus Surgical, Inc. :

 

On June 6, 2024, Asensus Surgical, Inc. (“Asensus”) entered into an agreement to be acquired by way of a cash-out merger. If the proposed merger is completed, Asensus will become an indirect, wholly-owned subsidiary of KARL STORZ SE & Co. KG, or KARL STORZ, and at the effective time of the merger each outstanding share of our common stock will be converted into the right to receive $0.35 in cash, without interest and less any applicable withholding taxes.

 

The disinterested members of our board of directors unanimously approved the merger agreement and has called a special meeting of our stockholders at which stockholders will have the opportunity to consider and vote upon a proposal to approve and adopt the merger agreement. The disinterested members of our board of directors unanimously recommends that you vote FOR each of the proposals to be considered at the special meeting, including approval of the adoption of the merger agreement. The attached Notice of Special Meeting includes further details about the special meeting, which will be held exclusively online via live audio webcast, in a virtual meeting format, beginning promptly at        Eastern Time on       , 2024.

 

No matter how many shares you own, your vote is important. The merger cannot be completed unless the merger agreement is approved and adopted by the holders of a majority of the outstanding shares of our common stock. A failure to vote your shares of our common stock on the proposal to approve and adopt the merger agreement will have the same effect as a vote “AGAINST” the proposal.

 

The attached proxy statement provides you with detailed information about the special meeting, the merger agreement and the merger. A copy of the merger agreement is attached as Appendix A. I encourage you to read the proxy statement, including its appendices and the documents incorporated by reference, carefully and in its entirety.

 

If you have any questions or need assistance in voting your shares, please contact our proxy solicitor, Alliance Advisors, by telephone at (844) 858-7383.

 

Thank you for your continued support.

 

Sincerely,

 

David B. Milne
Chair of the Board of Directors

 

Anthony Fernando

President and Chief Executive Officer

 


NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE MERGER, PASSED UPON THE MERITS OR FAIRNESS OF THE MERGER OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

The accompanying proxy statement is dated      , 2024, and, together with the enclosed form of proxy, is first being mailed to Asensus stockholders on or about      , 2024.

 

 

PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION, DATED JUNE 24, 2024

 

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Asensus Surgical, Inc.
1 TW Alexander Drive
Suite 160
Durham, North Carolina 27703

(919) 765-8400

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
to be held on

 

, 2024

 

TO THE STOCKHOLDERS OF ASENSUS SURGICAL, INC.

 

You are cordially invited to attend a special meeting of stockholders of Asensus Surgical, Inc., a Delaware corporation (the “Company” or “Asensus” or “we” or “our”), to be held exclusively on line by live audio webcast, in a virtual meeting format, accessible via                                       , beginning promptly at Eastern Time on , 2024. The purpose of the special meeting is to consider and vote upon the following proposals:

 

 

1.

Merger Proposal. To approve and adopt the Agreement and Plan of Merger, dated as of June 6, 2024 (which, as it may be amended from time to time, we refer to as the “merger agreement”), by and among KARL STORZ Endoscopy-America, Inc., a California corporation (“Parent”), and Karl Storz California Inc., a California corporation (“Merger Sub”), pursuant to which Asensus would be acquired by way of a merger with and into Merger Sub with Asensus surviving the merger and becoming a wholly-owned subsidiary of Parent, which we refer to as the “merger.”

 

 

2.

Merger-Related Compensation Proposal. To approve, in a non-binding advisory vote, certain compensation that may be paid or become payable to our named executive officers in connection with the merger.

 

 

3.

Adjournment Proposal. To approve one or more adjournments of the special meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger proposal at the time of the special meeting.

 

The disinterested members of our Board of Directors unanimously recommends our stockholders vote “FOR” each of these proposals.

 

General

 

This Notice of Special Meeting and proxy statement in which it is included is made available to Asensus stockholders in connection with the solicitation by the Board of Directors of the Company (the “Asensus Board”) of proxies for use at the special meeting to be held exclusively online via live audio webcast, in a virtual meeting format, beginning promptly at Eastern Time on , 2024, and at any adjournment or postponement thereof.

 

Mailing of Proxy Statement

 

On or about        , 2024, we mailed to our stockholders this Notice of Special Meeting and the accompanying proxy statement, together with appendices, and a form of proxy containing a “control number” and instructions on how a proxy may be submitted or authorized in advance of the special meeting via telephone, by mail or over the Internet. The control number is an identifying number specific to each stockholder of record, and will also permit a stockholder, after registering at                       , to access and remotely participate at the special meeting online via live audio webcast.

 

Certain stockholders who share the same address may receive only one copy of this Notice of Special Meeting and proxy statement and other materials in accordance with a notice delivered earlier this year from such stockholders’ bank, broker or other holder of record unless the applicable bank, broker or other holder of record received contrary instructions. This practice, known as “householding,” is designed to reduce printing and postage costs. Stockholders owning their shares through a bank, broker or other holder of record who wish to either discontinue or commence householding may request or discontinue householding, or may request a separate copy of this Notice of Special Meeting, and proxy statement and other materials, either by contacting their bank, broker or other holder of record at the telephone number or address provided to them, or contacting us by e-mail to corporatesecretary@asensus.com, or by mail to Corporate Secretary, Asensus Surgical, Inc., 1 TW Alexander  Drive, Suite 160, Durham, North Carolina 27703.

 

 

Voting Rights and Outstanding Shares

 

Our Board has fixed the close of business on        , 2024 as the record date for determining the stockholders of the Company entitled to notice of and to vote at the special meeting. On the record date,                shares of common stock, $0.001 par value per share, of the Company were issued and outstanding. Each share of common stock entitles the holder to one vote on each matter to be voted on at the special meeting.

 

The presence, remotely or by proxy, of at least one-third of the total number of shares of common stock entitled to vote is necessary to constitute a quorum at the special meeting. However, the affirmative vote of the majority of outstanding shares as of the record date is required to approve and adopt the merger agreement. If there are not sufficient votes for a quorum, or if otherwise determined to be necessary or appropriate, the special meeting may be adjourned or postponed from time to time, including in order to permit the further solicitation of proxies. Shares voted “FOR” or “AGAINST” with respect to any proposal, or abstaining, will be counted for purposes of determining whether a quorum is present. Non-voted shares with respect to all three proposals will not be considered present and entitled to vote and will therefore not count for purposes of a quorum.

 

Your vote is important. Most stockholders have a choice of directing their vote over the Internet prior to the special meeting, by using a toll-free telephone number or by completing a proxy card and mailing it in a postage-paid envelope that we will provide to you upon your request. Please check the information forwarded by your bank, broker or other holder of record to see what options are available to you. The Internet and telephone proxy vote facilities for stockholders of record are expected to remain open until the time that the voting concludes, and the polls are closed at the special meeting, but may remain open or be reopened if determined to be necessary or appropriate, or in the event of any adjournment or postponement of the special meeting. Stockholders of record may also vote via the Internet during the live audio webcast of the special meeting. In order to do so, a stockholder will need access to and will be required to input the control number assigned to that stockholder, as well as other identifying information. Beneficial owners should review the information provided to you by your bank, broker or other holder of record to see what options are available to you to attend and vote at the special meeting. We encourage all stockholders to vote by proxy in advance of the meeting. This will avoid any last-minute technical difficulties that a stockholder may otherwise experience in attending remotely and voting during the special meeting, and facilitate a prompt tabulation of the vote.

 

All shares of common stock entitled to vote and represented by properly submitted proxies received prior to the special meeting and not revoked, will be voted in accordance with your instructions. If no instructions are specified by a record holder, the shares of common stock represented by a proxy properly submitted by the record holder will be voted in accordance with the recommendations of the Asensus Board.

 

Alliance Advisors

200 Broadacres Drive, 3rd Floor
Bloomfield, NJ 07003

 

Stockholders may call toll free: (844) 858-7383

Banks and Brokers may call collect:                           

 

 

       , 2024

Durham, North Carolina

By Order of the Board of Directors,

 

 

 

Anthony Fernando
President and Chief Executive Officer

 

 

TABLE OF CONTENTS

 

  Page
PREFACE 1
  About This Proxy Statement 1
  Additional Information 1
  Forward-Looking Statements 1
  Date of Mailing 3
PROXY STATEMENT SUMMARY 4
  The Special Meeting 4
  Proposals Under Consideration 4
  The Parties 5
  The Merger 5
  Merger Consideration 6
  Treatment of Company Equity Awards 6
  Certain Material U.S. Federal Income Tax Consequences of the Merger 7
  Timing of the Merger and Related Contingencies 7
  Our Board’s Recommendation and Related Considerations 8
  Certain Other Terms of the Merger Agreement 9
  Statutory Rights of Appraisal 12
QUESTIONS AND ANSWERS 13
THE SPECIAL MEETING 19
  The Special Meeting 19
  Record Date — Who Can Vote — Shares Outstanding 20
  How To Cast Your Vote 20
  Revoking Your Proxy 20
  Voting By Our Directors and Executive Officers 21
  Voting Procedures and Technicalities 21
  Solicitation of Proxies 22
THE MERGER 23
  Parties Involved in the Merger 23
  The Merger and Its Effects 23
  Asensus Without the Merger 23
  Background of the Merger 24
  Financial Projections 33
  Reasons for Our Board’s Recommendation in Favor of the Merger 35
  Opinion of Asensus’ Financial Advisor 39
  Interests of Our Directors and Executive Officers in the Merger 44
  Quantification of Payments and Benefits to Named Executive Officers 48
  Certain Material U.S. Federal Income Tax Consequences 49
  Appraisal Rights 51
THE MERGER AGREEMENT 56
  Structure and Corporate Effects of the Merger 56
  Timing of the Merger 56
  Effect of the Merger on Our Common Stock 56
  Treatment of Asensus Equity Awards 57
  Payment for Common Stock in the Merger 58
  Representations and Warranties; Material Adverse Effect 58
  Conduct of the Business Pending the Merger 60
  No Solicitation; Alternative Proposals 63
  Company Stockholders’ Meeting 66
  Employee Matters 66
  Indemnification And Insurance 67
  Efforts to Complete the Merger 68
  Financing of the Merger 68
  Coordination on Litigation 68

 

 

  Other Covenants and Agreements 68
  Conditions to Completion of the Merger 69
  Termination 70
  Miscellaneous 72
THE MERGER PROPOSAL (PROPOSAL #1) 75
  Vote on Approval of the Merger Agreement 75
  Vote Required for Approval 76
  Board Recommendation 76
THE MERGER-RELATED COMPENSATION PROPOSAL (PROPOSAL #2) 76
  Non-Binding Advisory Vote on Merger Related Compensation to Our Named Executive Officers 76
  Vote Required for Approval 76
  Board Recommendation 76
THE ADJOURNMENT PROPOSAL (PROPOSAL #3) 77
  Vote on Adjournment of the Special Meeting to a Later Date or Dates 77
  Vote Required for Approval 77
  Board Recommendation 77
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 78
THE MARKET FOR OUR COMMON STOCK 80
MISCELLANEOUS 81
  Receiving the Merger Consideration 81
  Householding 81
  Stockholder Proposals for Our 2024 Annual Meeting, if needed 81
  Legal And Cautionary Disclosures 81
WHERE YOU CAN FIND MORE INFORMATION 84
  Incorporation by Reference 84
  Obtaining Copies 84

 

 

Appendix A Merger Agreement
Appendix B Opinion of Jefferies LLC
Appendix C Section 262 of the Delaware General Corporation Law

 

 

PRELIMINARY PROXY STATEMENT — SUBJECT TO COMPLETION, DATED JUNE 24, 2024

 

PREFACE

 

About This Proxy Statement

 

This proxy statement is being sent by Asensus Surgical, Inc., a Delaware corporation, which we refer to as “we,” “us,” “our,” “Asensus,” or the “Company,” and our board of directors, which we refer to as our “Board” or the “Asensus Board” to solicit proxies from our stockholders to vote their shares of our common stock at the special meeting of our stockholders to be held on July   , 2024, and at any adjournment or postponement thereof. At the special meeting, our stockholders will be asked, among other things, to approve and adopt the Agreement and Plan of Merger, dated June 6, 2024, which, as it may be amended from time to time, we refer to as the “merger agreement,” by and among Asensus, KARL STORZ Endoscopy-America, Inc., a California corporation, which we refer to as “Parent,” and Karl Storz California Inc., a California corporation and a wholly-owned subsidiary of Parent, which we refer to as “Merger Sub.” Pursuant to the terms of the merger agreement, Merger Sub will merge with and into Asensus, with Asensus continuing as the surviving corporation and becoming a wholly-owned subsidiary of Parent, which we refer to as the “merger.” We sometimes refer to Asensus as the surviving corporation following the merger as the “surviving corporation.”

 

Additional Information

 

We have elected to “incorporate by reference” certain information into this proxy statement, which means that we are disclosing important information to you by referring you to certain other documents that we have filed separately with the U.S. Securities and Exchange Commission, which we refer to as the “SEC,” and certain other documents that we may file with the SEC after the date of this proxy statement but prior to the special meeting. Because these documents contain important information and may subsequently amend this proxy statement, you should monitor and review our SEC filings until the special meeting is completed. References to this proxy statement are meant to include not only the main body of this proxy statement, but also the accompanying Notice of Special Meeting and proxy card, each of the appendices, and all of the information incorporated by reference. See “Where You Can Find More Information” on page 84.

 

We have not authorized anyone to provide any information other than what is contained in or incorporated by reference in this proxy statement, and take no responsibility for any information others may give you. See “Miscellaneous Legal and Cautionary Disclosures” on page 81.

 

Forward-Looking Statements

 

This proxy statement contains forward-looking statements, including statements related to our financial projections, the consequences of the outcome of the proposals to be considered and voted upon at the special meeting, the completion of the merger, or the consequences thereof. Forward-looking statements can usually be identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “possible,” “potential,” “project,” “should” and other expressions which indicate future events, expectations or trends that are not historical facts.

 

These forward-looking statements are based upon certain expectations and assumptions and are subject to risks and uncertainties. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Actual results could differ materially from those anticipated as a result of various factors, including:

 

 

Risks related to the consummation of the merger, including the risks that:

 

 

o

the merger may not be consummated within the anticipated time period, or at all;

 

 

o

we may fail to obtain stockholder approval of the merger agreement;

 

 

 

 

 

 

o

other conditions to the consummation of the merger under the merger agreement may not be satisfied; and

 

 

o

the occurrence of any event, change or other circumstance that would give rise to the termination of the merger agreement;

 

 

The effects that any termination of the merger agreement may have on us and our business, including the risks that:

 

 

o

our stock price may decline significantly if the merger is not completed; and

 

 

o

the merger agreement may be terminated in circumstances requiring us to pay Parent a termination fee of $3,600,000, plus any amounts then due to KARL STORZ under the secured promissory note, or the “Note,” under which we secured bridge funding to enable us to continue operations while pursuing approval of the merger agreement, which amounts could exceed $20,000,000;

 

 

The effects that the announcement or pendency of the merger may have on us and our business, including the risks that:

 

 

o

our business, operating results or stock price may suffer;

 

 

o

in the event that the merger is not approved by our stockholders, we will likely need to seek bankruptcy protection to preserve our assets as much as possible;

 

 

o

our current plans and operations will likely be disrupted;

 

 

o

our ability to retain or recruit employees would be adversely affected;

 

 

o

our business relationships with customers and vendors may be adversely affected; and

 

 

o

our management’s and other employees’ attention may be diverted from our ongoing operations due to the proposed merger;

 

 

The effect of limitations that the merger agreement places on our ability to operate our business or engage in strategic transactions as an alternative to the proposed merger;

 

 

The nature, cost and outcome of any future litigation and other legal proceeding, including any proceeding related to the merger; and

 

 

The risks described from time to time in our reports filed with the SEC under the heading “Risk Factors,” including Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 21, 2024, as amended by Amendment No. 1 filed with the SEC on April 29, 2024, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 14, 2024, any subsequent Quarterly Reports on Form 10-Q and in our other filings with the SEC.

 

All forward-looking statements are qualified by, and should be considered together with, these cautionary statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which such statements were made.

 

Except as required by applicable law, we undertake no obligation to update forward-looking statements (whether as a result of new information, future events or otherwise). However, we do advise you to consult any future disclosures we make on related subjects as may be detailed in our other filings made from time to time with the SEC.

 

 

Date of Mailing

 

This proxy statement, together with appendices and the related form of proxy, and Notice of Special Meeting, was first mailed to Asensus stockholders on or about        , 2024.

 

 

PROXY STATEMENT SUMMARY

 

This summary highlights selected information contained in this proxy statement, including with respect to the merger agreement and the merger. We encourage you to, and you should, read carefully this entire proxy statement, its appendices and the documents referred to or incorporated by reference in this proxy statement, as this summary may not contain all of the information that may be important to you in determining how to vote. You may obtain the information incorporated by reference into this proxy statement without charge by following the instructions under the section entitled Where You Can Find Additional Information on page 84.

 

The Special Meeting

 

Time:

       , Eastern Time

   

Date:

       , 2024

   

Place:

Exclusively online by live audio webcast, in a virtual meeting format, accessible                

   

Record Date:

       , 2024

   

Voting Eligibility:

Stockholders as of the close of business on the record date are entitled to notice of, and to vote at, the special meeting. Each share of our common stock is entitled to one vote on all matters to be voted on. As of the close of business on the record date, there were                 shares of our common stock outstanding.

   

Admission:

Only stockholders and authorized guests may attend the virtual meeting and all attendees will be required to provide the control number and other identifying information required for you to gain access to the virtual meeting. If you hold your shares in street name (i.e., through a bank, broker or other nominee), you are encouraged to pre-arrange with your bank, broker or other nominee how you may gain access to the virtual meeting.

 

Proposals Under Consideration

 

The following table summarizes each of the proposals to be considered and voted upon at the special meeting, including for each the vote required for approval, the voting recommendation of our Board, and the page number in this proxy statement where you can begin to find more information.

 

No.

 

Proposal

 

Voting Requirement

 

Voting

Recommendation

 

See

Page

 
1.  

Merger Proposal. To approve and adopt the Agreement and Plan of Merger, dated as of June 6, 2024, by and among Asensus, Merger Sub and Parent, pursuant to which Asensus would be acquired by way of a merger and become a wholly-owned subsidiary of Parent, which we refer to as the “merger proposal.”

 

The affirmative vote of a majority of our shares of common stock issued and outstanding and entitled to vote, provided that a quorum is also present.

 

FOR

    75  
2.  

Merger-Related Compensation Proposal. To approve, in a non-binding advisory vote, certain compensation that may be paid or become payable to our named executive officers in connection with the merger, which we refer to as the “merger-related compensation proposal.”

 

The affirmative vote of a majority of all shares of our common stock present in person or by proxy at the special meeting and entitled to vote; provided that a quorum is also present

 

FOR

    76  
3.  

Adjournment Proposal. To approve one or more adjournments of the special meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger proposal at the time of the special meeting, which we refer to as the “adjournment proposal.”

 

The affirmative vote of a majority of all shares of our common stock present in person or by proxy at the special meeting and entitled to vote

 

FOR

    77  

 

 

The Parties

 

Asensus Surgical, Inc. (referred to in this proxy statement as “we,” “us,” “our,” “Asensus,” or the “company”) is a Delaware corporation. We are headquartered in Durham, North Carolina. Our common stock is listed on the NYSE American (“NYSE American”) under the symbol “ASXC.”

 

Parent is a California corporation and a direct wholly-owned subsidiary of KARL STORZ.

 

Merger Sub is a wholly-owned subsidiary of Parent formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement.

 

For more information about these and other parties, see “Parties Involved in the Merger” on page 23.

 

The Merger

 

We are asking you to approve a proposal to approve and adopt the merger agreement as a plan of merger.

 

A copy of the merger agreement is attached as Appendix A. For a discussion of certain terms and conditions of the merger agreement, see the section entitled “The Merger Agreement” on page 56. References in this proxy statement to the merger agreement include the merger agreement as it may be amended from time to time.

 

The merger agreement provides, among other things, that at the effective time of the merger, Merger Sub will be merged with and into Asensus. Asensus will continue as the surviving corporation in the merger. As a result of the merger, Asensus’ common stock will be delisted from the NYSE American and will be deregistered under the Securities Exchange Act of 1934, which we refer to as the “Exchange Act.” As a result of the merger, Asensus will thereby become a wholly-owned subsidiary of Parent, our common stock will no longer be publicly traded and our existing stockholders will cease to have any ownership interest in Asensus. See “The Merger The Merger and Its Effects” on page 23 and “The Merger Agreement Structure and Corporate Effects of the Merger” on page 56.

 

 

Merger Consideration

 

As a result of the merger, each share of our common stock that is issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive $0.35 in cash, without interest, which we refer to as the “merger consideration,” and less any applicable withholding taxes, except for (1) any shares that are owned by Asensus as treasury stock or directly or indirectly owned by Parent, any of its subsidiaries (including Merger Sub), or by us or any of our subsidiaries, which, collectively, we refer to as the “cancelled shares,” and (2) any shares of common stock as to which appraisal rights have been perfected (and not withdrawn or lost) in accordance with applicable law, which we refer to as “dissenting shares” (as described under “The Merger Agreement Effect of the Merger on Our Common Stock” on page 56).

 

At the effective time of the merger, our then outstanding common stock will no longer be outstanding and will automatically be cancelled and will cease to exist, and each holder thereof will cease to have any rights with respect to our common stock, except the right to receive the merger consideration and, for any stockholders who elect to pursue dissenter’s rights, their rights as dissenting stockholders under applicable law. See “The Merger The Merger and Its Effects” on page 23, “The Merger Appraisal Rights” at page 51 and “The Merger Agreement Effect of the Merger on Our Common Stock” on page 56.

 

Treatment of Company Equity Awards

 

Company Stock Options: As of the effective time, each option to purchase shares of our common stock (each, a “Company Option”) granted by the Company under any of the Company’s Amended and Restated Incentive Compensation Plan, the TransEnterix, Inc. 2006 Stock Plan, the Rampertab Employment Inducement Performance Restricted Stock Unit Award Agreement, the Rampertab Employment Inducement Restricted Stock Award Agreement and the Rampertab Employment Inducement Stock Option Award Agreement (collectively, the “Company Incentive Plans”) that is outstanding as of immediately prior to the effective time of the merger, or the “effective time,” whether or not then vested, will be cancelled and will immediately cease to be outstanding, without any payment with respect to such Company Option or cancellation thereof except as provided in the following sentences.  At the effective time, each Company Option that is subject to a vesting schedule (“Unvested Option”) shall be canceled and converted into the conditional right to receive an amount in cash (an “Unvested Cash Option Award”) equal to the product of (1) the excess, if any, of (x) the merger consideration over (y) the per share exercise price for such Unvested Option, and (2) the total number of shares of common stock underlying such Unvested Option, less applicable tax withholdings, subject to the same vesting schedule and other terms and conditions set forth in the applicable documents immediately prior to the effective time, except for terms rendered inoperative by reason of the transactions contemplated by the merger agreement or for such other administrative or ministerial changes made in connection with the administration of such Unvested Cash Option Awards following the effective time.

 

Time-Based Restricted Stock Units: As of the effective time, each restricted stock unit that was granted by the Company subject to time-based vesting only (each, a “Company RSU”) that is unvested and outstanding as of immediately prior to the effective time will be cancelled and will immediately cease to be outstanding, without any payment with respect to such Company RSU or cancellation thereof except as provided in the following sentences. At the effective time, each Company RSU that is subject to a vesting schedule (“Unvested RSU”) shall be converted into the conditional right to receive an amount in cash (an “Unvested Cash RSU Award”) equal to the product of (A) the total number of shares of common stock underlying such Unvested RSU and (B) the merger consideration, less applicable tax withholdings, subject to the same vesting schedule and other terms and conditions set forth in the applicable documents (including any applicable Company Incentive Plan and RSU agreement or other document evidencing such Unvested RSU) immediately prior to the effective time, except for terms rendered inoperative by reason of the transactions contemplated by the merger agreement or for such other administrative or ministerial changes made in connection with the administration of such Unvested Cash RSU Awards following the effective time.

 

Performance-Based Restricted Stock Units: As of the effective time, each restricted stock unit that was granted by the Company subject to performance-based vesting conditions (each, a “Company PRSU”) that is unvested and outstanding as of immediately prior to the effective time will be cancelled and will immediately cease to be outstanding, without any payment with respect to such Company PRSU or cancellation thereof except as provided in the following sentences. 

 

 

Each Company PRSU that is outstanding and no longer subject to performance-based vesting immediately prior to the effective time will vest as of and contingent upon the effective time (“Vested PRSU”). In full satisfaction of the cancellation of each Vested PRSU, Parent will cause the surviving corporation, as soon as reasonably practicable following the effective time, to pay, in accordance with the general payroll practices of the surviving corporation, to the holder of such Vested PRSU, an amount in cash in respect thereof equal to the product of (i) the merger consideration and (ii) the total number of shares of common stock underlying such Vested PRSU, less applicable tax withholdings. 

 

At the effective time, each Company PRSU that is subject to a vesting schedule (“Unvested PRSU”) shall be converted into the conditional right to receive an amount in cash (an “Unvested Cash PRSU Award”) equal to the product of (A) the total number of shares of common stock underlying such Unvested PRSU and (B) the merger consideration, less applicable tax withholdings, subject to the same vesting schedule and other terms and conditions set forth in the applicable documents (including any applicable Company Incentive Plan and PRSU agreement or other document evidencing such Unvested PRSU) immediately prior to the effective time, including all performance-based vesting conditions, except for terms rendered inoperative by reason of the transactions contemplated by the merger agreement or for such other administrative or ministerial changes made in connection with the administration of such Unvested Cash PRSU Awards following the effective time. 

 

As of the effective time, the Company Incentive Plans will terminate and all rights under any other plan, program or arrangement providing for the issuance or grant of any other interest with respect to the capital stock of the Company or any Company subsidiary will be cancelled.  

 

See “The Merger Agreement Treatment of Asensus Equity Awards” on page 57.

 

Certain Material U.S. Federal Income Tax Consequences of the Merger

 

For U.S. federal income tax purposes the exchange of our common stock for cash pursuant to the merger will generally result in the recognition of gain or loss in an amount measured by the difference, if any, between the amount of cash that such U.S. holder receives in the merger and such U.S. holder’s adjusted tax basis in the shares of our common stock surrendered. A more complete description of the U.S. federal income tax consequences of the merger is provided under “The Merger Certain Material U.S. Federal Income Tax Consequences” on page 49.

 

Timing of the Merger and Related Contingencies

 

Timing of the Merger

 

The closing of the merger will take place remotely at 9:00 a.m. Eastern Time two business days after the satisfaction or waiver of the conditions set forth in the merger agreement, or at such other time otherwise agreed by the parties. We currently expect to complete the merger in the third quarter of 2024. However, we cannot predict the exact timing of completion of the merger. The date on which the closing occurs is sometimes referred to as the “closing date.” See “The Merger Agreement Timing of the Merger” on page 56.

 

On the closing date, we will file a certificate of merger with the Secretary of State of the State of Delaware and the merger will be effective on the date and at the time the certificate of merger is filed or such later date and time as Parent and Asensus specify in the certificate of merger. The date and time on which the merger becomes effective is referred to as the “effective time.”

 

Conditions to Completion of the Merger

 

The respective obligations of Asensus, Parent and Merger Sub to consummate the merger are subject to the satisfaction or waiver of certain customary conditions, including the adoption of the merger agreement by our stockholders, the absence of any legal prohibitions to the consummation of the merger, the accuracy of the representations and warranties of the parties, a lack of a material adverse effect on the Company, compliance by the parties with their respective obligations under the merger agreement, and delivery of a certificate by a duly authorized officer that the foregoing conditions have been satisfied. For a description of these conditions, see “The Merger Agreement Conditions to Completion of the Merger” on page 69.

 

 

Regulatory Approvals

 

The consummation of the merger is not conditioned on any antitrust or competition law regulatory filings in the United States or other jurisdictions, or other regulatory approvals. See “The Merger Agreement Conditions to Completion of the Merger” on page 69.

 

Our Boards Recommendation and Related Considerations

 

Board Recommendation

 

After careful consideration, the disinterested members of our Board unanimously approved the merger agreement, the merger and the other transactions contemplated by the merger agreement. The disinterested members of our Board unanimously recommends that you vote (i) “FOR” the approval of the merger proposal, which we refer to as the “board recommendation,” (ii) “FOR” the approval of the merger-related compensation proposal, and (iii) “FOR” the approval of the approval of the adjournment proposal. For a summary of the reasons for our Board’s recommendation in favor of the merger, see “The Merger Reasons for Our Boards Recommendation in Favor of the Merger” on page 35.

 

Additional information about the process leading to our Board’s approval of the merger and the execution of the merger agreement can be found under “The Merger Background of the Merger” on page 24.

 

Opinion of Asensus Financial Advisor

 

Asensus engaged Jefferies LLC (“Jefferies”) as financial advisor to Asensus in connection with the merger. As part of this engagement, Jefferies delivered a written opinion, dated June 6, 2024, to the Asensus Board as to the fairness, from a financial point of view and as of such date, of the merger consideration to be received by holders of our common stock (other than, as applicable, KARL STORZ, Parent, Merger Sub and their respective affiliates) pursuant to the merger agreement. The full text of Jefferies’ opinion, which describes various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Jefferies, is attached as Appendix B to this proxy statement and is incorporated herein by reference. Jefferies opinion was provided for the use and benefit of the Asensus Board (in its capacity as such) in its evaluation of the merger consideration from a financial point of view and did not address any other aspect of the merger or any other matter. Jefferies opinion did not address the relative merits of the merger or other transactions contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available to Asensus, nor did it address the underlying business decision by Asensus to engage in the merger or other transactions contemplated thereby. Jefferies opinion did not constitute a recommendation to the Asensus Board, and does not constitute a recommendation to any securityholder, as to how to vote or act with respect to the merger or any other matter. The summary of Jefferies’ opinion set forth herein is qualified in its entirety by reference to the full text of Jefferies’ opinion.

 

Interests of our Directors and Executive Officers in the Merger

 

In considering the recommendation of our Board that you vote for the merger proposal, you should be aware that certain of our directors and executive officers have interests in the merger that are different from, or in addition to, your interests as a stockholder. These interests are summarized under “The Merger Interests of Our Directors and Executive Officers in the Merger” on page 44. Our Board was aware of these interests in approving the merger agreement and the merger and in recommending that the merger agreement be approved and adopted by the stockholders of the company.

 

 

The compensation that may become payable to our named executive officers in connection with the merger is subject to a non-binding advisory vote of the company’s stockholders, as described below in “The Merger-Related Compensation Proposal (Proposal #2)” on page 76.

 

Shares Held by our Directors and Executive Officers

 

As of the record date, our directors and executive officers beneficially owned and/or were entitled to vote, in the aggregate,           shares of Asensus common stock, representing approximately % of the shares of common stock outstanding on the record date (and approximately     % of the shares of common stock outstanding when taking into account Company Options, Company RSUs and Company PRSUs held, in the aggregate, by our directors and executive officers).

 

Our directors and executive officers have informed us that they currently intend to vote all of their respective shares of common stock (i) “FOR” the approval of the merger proposal, (ii) “FOR” the approval of the merger-related compensation proposal, and (iii) “FOR” the approval of the approval of the adjournment proposal.

 

Certain Other Terms of the Merger Agreement

 

No Solicitation

 

From the date of the merger agreement, Asensus shall cease and terminate, and shall use reasonable best efforts to cause its representatives to cease and terminate, all solicitations, discussions, and negotiations with any person with respect to any offer or proposal or potential offer or proposal relating to any proposed transaction or series of related transactions, other than the transactions contemplated by the merger agreement, involving a potential alternative proposal to acquire the Company, or a “Company Acquisition Proposal.” From the date of the merger agreement until the earlier of termination of the merger agreement or the effective time, Asensus will not and will cause its representatives not to directly or indirectly (A) initiate, solicit, knowingly encourage or facilitate the making of any offer or proposal which constitutes or is reasonably likely to lead to a Company Acquisition Proposal, (B) enter into any agreement with respect to a Company Acquisition Proposal or (C) engage in negotiations or discussions with, or provide any non-public information or data to, any person (other than Parent or any of its Affiliates or Representatives) relating to any Company Acquisition Proposal, or grant any waiver or release under any restriction from making a Company Acquisition Proposal, in each case, other than discussions solely to notify such person of the terms of the prohibition on solicitation or to clarify the terms and conditions of such proposal or offer.

 

Superior Proposal

 

Notwithstanding the prohibition on solicitation, at any time following the date of the merger agreement and prior to the date on which the stockholders of the Company adopt the merger agreement, Asensus and its representatives may furnish non-public information concerning Asensus’ business, properties or assets to any person in accordance with a confidentiality agreement with terms no less favorable in the aggregate to Asensus than those contained in the confidentiality agreement entered into between the Company and KARL STORZ on February 10, 2022, and may participate in discussions and negotiations with such person concerning a Company Acquisition Proposal if, but only if, such person has submitted a bona fide proposal to Asensus relating to such Company Acquisition Proposal that the Asensus Board determines in good faith, after consultation with Asensus’ outside counsel and financial advisor, is or is reasonably likely to lead to a Superior Proposal. From and after the date of the merger agreement and prior to the special meeting, Asensus will promptly (and in any event within forty-eight (48) hours) notify Parent if Asensus or any Company subsidiary or representative receives (i) any Company Acquisition Proposal or indication by any person that it is considering making a Company Acquisition Proposal, (ii) any request for non-public information relating to Asensus or any Company subsidiary other than requests for information in the ordinary course of business and unrelated to a Company Acquisition Proposal or (iii) any inquiry or request for discussions or negotiations with respect to any Company Acquisition Proposal. Asensus will provide Parent promptly (and in any event within such forty-eight (48) hour period) with the identity of such person and a correct and complete copy of such Company Acquisition Proposal, indication, inquiry or request (or, where such Company Acquisition Proposal is not in writing, a description of the material terms and conditions of such Company Acquisition Proposal, indication, inquiry or request), including any modifications thereto. Asensus will keep Parent reasonably informed (orally and in writing) on a current basis (and in any event no later than forty-eight (48) hours after the occurrence of any material changes, developments, discussions or negotiations) of the status of any Company Acquisition Proposal, indication, inquiry or request (including the material terms and conditions thereof and of any modification thereto), and any material developments, discussions and negotiations, including furnishing copies of any written inquiries, correspondence, and draft documentation, and written summaries of any material oral inquiries or discussions. Without limiting the foregoing, Asensus will promptly (and in any event within forty-eight (48) hours) notify Parent orally and in writing if it determines to begin providing information or to engage in discussions or negotiations concerning a Company Acquisition Proposal and will in no event begin providing such information or engaging in such discussions or negotiations prior to providing such notice. Asensus will not, and will cause each Company subsidiary not to, enter into any agreement with any person subsequent to the date of the merger agreement that would restrict the Company’s ability to provide such information to Parent and neither Asensus nor any Company subsidiary is currently party to any agreement that prohibits Asensus from providing to Parent the information described above. Asensus (A) will not, and will cause each Company subsidiary not to, terminate, waive, amend or modify any provision of, or grant permission or request under, any standstill or confidentiality agreement to which it or any Company subsidiary is or becomes a party, and (B) will, and will cause each Company subsidiary to, use reasonable best efforts to enforce any such agreement unless the Asensus Board determines in good faith, after consultation with the Company’s outside counsel, that the failure to do so would be inconsistent with the fiduciary duties of the Asensus Board to the Company’s stockholders under applicable law, in which event Asensus may take the actions described in these clauses (A) and (B) solely to the extent necessary to permit a third party to make, on a confidential basis to the Asensus Board, a Company Acquisition Proposal, conditioned upon such third party agreeing that Asensus shall not be prohibited from providing any information to Parent (including regarding any such Company Acquisition Proposal) in accordance with, and otherwise complying with, this provision, Asensus will promptly provide to Parent any non-public information concerning Asensus or any Company subsidiary provided or made available which was not previously provided or made available to Parent. For purposes of the merger agreement, a “Superior Proposal” is a written Company Acquisition Proposal that did not result from or involve a material breach of this provision and that proposes an acquisition of more than fifty percent (50%) of the equity securities or consolidated total assets of Asensus and the Company subsidiaries on terms which the Asensus Board determines in its good faith judgment to be more favorable to the holders of the shares of common stock than the transactions contemplated hereby (after consultation with the Company’s outside counsel and financial advisor), taking into account all the terms and conditions of such proposal and the merger agreement, which the Asensus Board has determined to be as or more reasonably likely to be completed on the terms proposed than the transactions contemplated by the merger agreement, taking into account all financial, regulatory, legal and other aspects of such proposal and the terms of the merger agreement.

 

 

No Change in Recommendation

 

Except as provided in the merger agreement, neither the Asensus Board nor any committee thereof will (i)(A) withdraw, amend, change, modify for qualifying, or otherwise proposing publicly to withdraw, amend, change, modify or qualify, in a manner adverse to Parent or Merger Sub, its recommendation that the merger agreement be adopted, (B) fail to make a recommendation with respect to the merger agreement, (C) approve or recommend or declare advisable any Company Acquisition Proposal or (D) fail to recommend against any publicly announced Company Acquisition Proposal, which we refer to as a “Company Adverse Recommendation Change” or (ii) enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, or similar agreement (an “Alternative Acquisition Agreement”) providing for the consummation of a transaction contemplated by any Company Acquisition Proposal (other than a confidentiality agreement referenced above entered into in the circumstances referenced above). Asensus, promptly following a determination by the Asensus Board that a Company Acquisition Proposal is a Superior Proposal, will notify Parent of such determination.

 

Termination in Response to a Superior Proposal

 

Prior to the date of the special meeting, if (i) Asensus receives a Company Acquisition Proposal from a third person that is not in violation of such third person’s contractual obligations to Asensus, (ii) a material breach by Asensus of the prohibition on solicitation has not contributed to the making of such Company Acquisition Proposal and (iii) the Asensus Board concludes in good faith, after consultation with the Company’s outside counsel and financial advisor, that such Company Acquisition Proposal constitutes a Superior Proposal after giving effect to all of the adjustments of the merger agreement that are offered in writing by Parent, the Asensus Board may, if it determines in good faith, after consultation with the Company’s outside counsel, that failure to take such action would be inconsistent with its fiduciary duties to its stockholders, (A) effect a Company Adverse Recommendation Change or (B) terminate the merger agreement to enter into an Alternative Acquisition Agreement with respect to such Superior Proposal; provided, however, that Asensus will not terminate the merger agreement in accordance with clause (B) above, and any purported termination in accordance with clause (B) above will be void and of no force or effect, unless in advance of or concurrently with such termination Asensus (1) pays the termination fee and (2) immediately following such termination enters into a binding definitive Alternative Acquisition Agreement for such Superior Proposal; provided, further, that the Asensus Board may not effect a change of its recommendation in accordance with clause (A) above or terminate the merger agreement in accordance with clause (B) above unless (I) no material breach of the Company’s obligations regarding solicitation has occurred, (II) Asensus has provided prior written notice to Parent, at least three (3) business days in advance (the “Notice Period”), of its intention to take such action with respect to such Superior Proposal, which notice will specify the material terms and conditions of any such Superior Proposal (including the identity of the party making such Superior Proposal), and has contemporaneously provided a correct and complete copy of the proposed Alternative Acquisition Agreement with respect to such Superior Proposal, (III) prior to effecting such Company Adverse Recommendation Change or terminating the merger agreement to enter into a definitive Alternative Acquisition Agreement with respect to such Superior Proposal, Asensus has, and has caused its Representatives to, during the Notice Period, negotiate with Parent in good faith (to the extent Parent requests to negotiate) to make such adjustments in the terms and conditions of the merger agreement so that such Company Acquisition Proposal ceases to constitute a Superior Proposal and (IV) following any negotiation described in clause (III) above, the Asensus Board concludes in good faith, after consultation with the Company’s outside counsel and financial advisor, that such Company Acquisition Proposal continues to constitute a Superior Proposal. In the event of any material revisions to the Superior Proposal after the start of the Notice Period, Asensus is required to deliver a new written notice to Parent and to comply with the requirements with respect to such new written notice, and the Notice Period will be deemed to have re-commenced on the date of such new notice, except that the references to three (3) business days shall be deemed two (2) business days. Any Company Adverse Recommendation Change will not change the approval of the Asensus Board for purposes of causing any state takeover statute or other Law to be inapplicable to the transactions contemplated hereby.

 

 

Company Intervening Event

 

The Asensus Board may make a Company Adverse Recommendation Change in the absence of a Company Acquisition Proposal if a Company Intervening Event has occurred, and the Asensus Board has concluded in good faith, after consultation with the Company’s outside counsel, that failure to make a Company Adverse Recommendation Change on account of the Company Intervening Event would be inconsistent with its fiduciary duties, provided, however, that the Asensus Board will not make a Company Adverse Recommendation Change unless Asensus has (i) provided to Parent at least three (3) business days’ prior written notice advising Parent that the Asensus Board intends to take such action and specifying the Company Intervening Event in reasonable detail and (ii) during such three (3) business day period, if requested by Parent, engaged in good faith negotiations with Parent to amend the merger agreement in such a manner that obviates the need or reason for the Company Adverse Recommendation Change.

 

Return of Confidential Information

 

Asensus will promptly (but in no event later than three (3) business days after the date of the merger agreement) demand that each person that has executed a confidentiality agreement in connection with a potential Company Acquisition Proposal within the one-year period prior to the date of the merger agreement return (or destroy, to the extent permitted by the applicable confidentiality agreement) all confidential information furnished to such individual or entity by or on behalf of Asensus or any Company subsidiary.

 

Exchange Act Communications

 

Nothing in the merger agreement will prohibit Asensus from (i) taking and disclosing to the stockholders of Asensus a position contemplated by Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation M-A promulgated under the Exchange Act, including any “stop, look and listen” communication pursuant to Rule 14d-9(f) promulgated under the Exchange Act, or (ii) making any disclosure to the stockholders of Asensus that is required by applicable Law; provided that this provision will not be deemed to permit the Asensus Board to make a Company Adverse Recommendation Change except to the extent permitted above.

 

 

Statutory Rights of Appraisal

 

If the merger agreement is approved by our stockholders at the special meeting and the merger is consummated, a stockholder who does not vote in favor of the merger proposal and who otherwise complies with Section 262 of the Delaware General Corporation Law (the “DGCL”) will be entitled to demand payment of the “fair value” of such stockholder’s shares of our common stock. These rights under the DGCL, which we refer to as “dissenters’ rights,” are discussed under “Appraisal Rights” on page 51. We refer to stockholders exercising these dissenters’ rights as “dissenting stockholders.”

 

Any exercise of dissenters’ rights must comply with the procedures set forth in Section 262 of the DGCL, a copy of which section is attached as Appendix C to this proxy statement.

 

 

QUESTIONS AND ANSWERS

 

Below are brief answers to some of the key questions that we anticipate you might have. These questions do not address all of the material topics covered by this proxy statement, nor do the answers include all of the material information provided by this proxy statement. Please refer to the complete proxy statement for additional information and before you vote.

 

Q:

Why am I receiving this document?

 

A:

On June 6, 2024, Asensus entered into an agreement providing for the Company to be acquired by way of a cash-out merger and become a wholly-owned subsidiary of Parent. You are receiving this document in connection with the solicitation of proxies by our Board in favor of the proposal to approve and adopt the merger agreement, which we refer to as the merger proposal, and related proposals to be voted on at the special meeting. In addition, this document is our formal notice to you of your statutory rights of appraisal under Delaware law.

 

Q:

What is a proxy?

 

A:

A proxy is your legal designation of another person, referred to as a “proxy,” to vote your shares of our common stock. The written document describing the matters to be considered and voted on at the special meeting is called a “proxy statement.” The document used to designate a proxy to vote your shares of our common stock is called a “form of proxy” or “proxy card.” Our Board has designated each of Shameze Rampertab and Joshua Weingard, and each of them with full power of substitution, as proxies for the special meeting.

 

Q:

When and where is the special meeting?

 

A:

The special meeting will be to be held exclusively online via live audio webcast, in a virtual meeting format, beginning promptly at Eastern Time on , 2024. In certain circumstances, the special meeting could be adjourned to another time, date or place. All references in our proxy materials to the special meeting include any adjournment or postponement of the special meeting.

 

Q:

Who can vote?

 

A:

Holders of record of our common stock (“common stock”) as of the close of business on        , 2024 (the “record date”), will be entitled to notice of and to vote at the special meeting and at any adjournment or postponement. Holders of shares of common stock are entitled to vote on all matters brought before the special meeting.

 

 

As of the record date, there were            shares of common stock outstanding and entitled to vote on the election of directors and all other matters. Holders of common stock will vote on all matters as a class. Holders are entitled to one vote for each share of common stock outstanding as of the record date.

 

 

You do not need to participate in the virtual special meeting to vote your shares. Instead, you may vote by Internet or by telephone using the instructions in the Notice of Internet Availability of Proxy Materials, or if you received a paper copy of the proxy card, by signing and returning it in the envelope provided.

 

Q:

How do I vote?

 

A:

If you are a stockholder of record (your shares are registered directly in your name with our transfer agent), you may vote at the virtual special meeting, vote by proxy by telephone, through the Internet or, if you received a paper copy of the proxy card, by signing and returning it in the envelope provided. To vote through the Internet, go        to and complete an electronic proxy card. You will be asked for the Control Number, which is provided on the Notice of Internet Availability of Proxy Materials or, if you received a paper copy, on the proxy card. For stockholders of record who want to attend the virtual Annual Meeting, you will be able to attend the special meeting online, view the list of stockholders of record upon request, vote your shares electronically and submit questions prior to the meeting. In order to attend the special meeting, you must register at         using the control number on your proxy card or Notice of Internet Availability of Proxy Materials. The registration deadline is , 2024 at 5:00 p.m. Eastern Time. Please be sure to follow instructions found on your proxy card or voting instruction card and subsequent instructions that will be delivered to you via email.

 

 

 

If you are a beneficial owner of shares (your shares are held in the name of a brokerage firm, bank, or other nominee), you may vote by following the instructions provided in the voting instruction form, or other materials provided to you by the brokerage firm, bank, or other nominee that holds your shares. To vote your shares at the special meeting, you must obtain a legal proxy from the brokerage firm, bank, or other nominee that holds your shares, and present such legal proxy from the brokerage firm, bank, or other nominee that holds your shares for admittance to the Annual Meeting. Then you must register at         using the control number on your proxy card Notice of Internet Availability of Proxy Materials. The registration deadline is , 2024 at 5:00 p.m. Eastern Time. Please be sure to follow instructions found on your proxy card or voting instruction card and subsequent instructions that will be delivered to you via email.

 

 

Whether you plan to participate in the special meeting or not, we urge you to vote by proxy to ensure your vote is counted. Voting by proxy will not affect your right to attend the Annual Meeting and vote. If you properly complete your paper or electronic proxy and submit it to us in time, the “proxy” (one of the individuals named on the proxy card) will vote your shares as you have directed. If you sign the proxy card but do not make specific choices, the proxy will vote your shares as recommended by the Asensus Board and, as to any other matters properly brought before the special meeting, in the sole discretion of the proxy. We will accept all proxies delivered to us by         , 2024 at 5:00 p.m. Eastern Time.

 

Q:

What constitutes a quorum at the Special Meeting?

 

A:

The presence, by registering and participating in the special meeting or by submitting a proxy, of the holders of one-third of the outstanding shares of common stock is necessary to constitute a quorum at the meeting. Abstentions in each of the proposals will be counted for the purpose of determining whether a quorum is present at the meeting and as votes cast and will have the same effect as a vote “AGAINST” the merger proposal. An abstention will have no effect for purposes of determining the outcome of the vote on the merger-related compensation proposal or the adjournment proposal, provided that a quorum is otherwise present. Broker non-votes will be counted for the purpose of determining the existence of a quorum at the special meeting. Adoption and approval of the merger agreement will require the affirmative vote of a majority of the outstanding shares of common stock as of the record date.

 

Q:

What is the difference between holding shares as a stockholder of record and as a beneficial owner?

 

A:

If your shares are registered directly in your name with our transfer agent, Continental Stock Transfer & Trust Company, you are considered, with respect to those shares, to be the “stockholder of record.” In this case, we have sent this proxy statement and your proxy card to you directly.

 

 

If your shares are held through a broker, bank or other nominee, you are considered the “beneficial owner” of the shares of our common stock held in “street name.” In that case, this proxy statement has been forwarded to you by your broker, bank or other nominee who is considered, with respect to those shares, to be the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or other nominee on how to vote your shares by following their instructions for voting. You are also invited to attend the special meeting. However, because you are not the stockholder of record, in order to attend and vote your shares at the virtual special meeting you may need to pre-arrange your attendance through your broker, bank or other nominee and request and obtain a valid legal proxy, or have other verifying information from your broker, bank or other nominee, in order to register for and attend the meeting. Beneficial owners should review the information provided to you by your bank, broker or other holder of record to see what options are available to you to attend and vote at the special meeting.

 

Q:

What matters will be voted on at the special meeting?

 

A:

You will be asked to consider and vote on the following proposals:

 

 

to approve and adopt the merger agreement (which we describe in greater detail beginning on page 57);

 

 

 

to approve, in a non-binding advisory vote, certain compensation that may be paid or become payable to our named executive officers in connection with the merger (which we describe in greater detail on page 44); and

 

 

to approve one or more adjournments of the special meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger agreement at the time of the special meeting (which we describe in greater detail on page 78).

 

Q:

What is the proposed merger and what effects will it have on Asensus?

 

A:

The proposed merger is the acquisition of Asensus by Parent pursuant to the merger agreement. If the merger proposal is approved by the holders of our common stock and the other closing conditions under the merger agreement are satisfied or waived, Merger Sub will merge with and into Asensus, with Asensus continuing as the surviving corporation. As a result of the merger, Asensus will become a wholly-owned subsidiary of Parent. We would delist our common stock from the NYSE American and deregister our common stock under the Exchange Act as soon as reasonably practicable following the effective time of the merger, and at such time, we will no longer be a publicly traded company and will no longer file periodic reports with the SEC. If the merger is consummated, you will not own any shares of the surviving corporation or have any other ownership interest in Asensus.

 

Q:

What happens if the merger is not completed?

 

A:

If the merger agreement is not approved by our stockholders or if the merger is not consummated for any other reason, our stockholders will not receive any payment for their shares of common stock in connection with the merger. Instead, we will remain a public company, our common stock will continue to be listed and traded on the NYSE American and registered under the Exchange Act, and we will continue to file periodic reports with the SEC.

 

 

Because the Company is unlikely to be able to secure needed capital following a failed merger vote and because of the Company’s obligation to repay the amounts due under the Note to KARL STORZ, and the security interests supporting such obligation to pay, if the merger agreement is not approved and adopted by our stockholders we will be forced to seek bankruptcy protection in order to maximize the value of our assets as we seek an orderly liquidation of the Company.

 

 

Under specified circumstances, we may be required to pay to Parent a termination fee and expenses upon the termination of the merger agreement, as described under “The Merger Agreement Termination” on page 70.

 

Q:

What will I receive if the merger is completed?

 

A:

Upon completion of the merger, and assuming you do not exercise dissenters’ rights, you will be entitled to receive the merger consideration of $0.35 in cash, without interest and less any applicable withholding taxes, for each share of our common stock that you own. For example, if you own 1,000 shares of our common stock, you will receive $350.00 in cash in exchange for your shares of our common stock, less any applicable withholding taxes.

 

Q:

How does the merger consideration compare to the market price of Asensus common stock prior to the public announcement of the merger agreement?

 

A:

The merger consideration represents a premium of approximately 52% to our closing stock price on June 6, 2024, the last trading day before the public announcement of the merger agreement, and a premium of approximately 67% based on the per share closing price of the common stock on the NYSE American on April 2, 2024, the date prior to the first announcement of a potential transaction with KARL STORZ.

 

Q:

What will the holders of Asensus equity awards, such as stock options or restricted stock units, receive in the merger?

 

A:

Any Company PRSU for which the performance goal achievement has been previously determined will be accelerated and vest as of and contingent upon the occurrence of the effective time and be paid out in cash in an amount equal to the merger consideration, less applicable tax withholding. All unvested Company Options with an exercise price lower than $0.35 per shares and unvested Company RSUs and Company PRSUs (except as described above) will be converted to conditional cash awards based on the current vesting schedule and the holders will be paid the equivalent of the merger consideration upon the vesting of any such awards, subject to compliance with the other terms and conditions applying to such equity awards.

 

 

 

Any payments in respect of Company Options or other equity awards are subject to any applicable withholding tax. See “The Merger Agreement Treatment of Asensus Equity Awards” on page 58.

 

Q:

When do you expect the merger to be completed?

 

A:

We are working toward completing the merger as soon as possible after the date of the special meeting, and currently expect to consummate the merger during the third quarter of 2024. However, the exact timing of completion of the merger cannot be predicted because the merger is subject to conditions, including adoption of the merger agreement by our stockholders. See “The Merger Agreement Timing of the Merger” on page 56 and “The Merger Agreement Conditions to Completion of the Merger” on page 69.

 

Q:

Am I entitled to appraisal or dissenters rights under Delaware law?

 

A:

Yes. As a holder of our common stock, you are entitled to exercise dissenters’ rights under the DGCL in connection with the merger if you take certain actions and meet certain conditions. See “The Merger Appraisal Rights” on page 51.

 

Q:

Will I be subject to U.S. federal income tax upon the exchange of Asensus common stock for cash pursuant to the merger?

 

A:

Generally, yes, if you are a U.S. holder. The exchange of our common stock for cash pursuant to the merger generally will require a U.S. holder to recognize a gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between (1) the amount of cash received by such U.S. holder pursuant to the merger plus the amount used to satisfy any applicable withholding taxes and (2) such U.S. holder’s adjusted tax basis in the shares of our common stock surrendered pursuant to the merger. Backup withholding may apply to the cash payment made pursuant to the merger unless the U.S. holder or other payee provides a valid taxpayer identification number and complies with certain certification procedures (generally, by providing a properly completed and executed IRS Form W-9) or otherwise establishes an exemption from backup withholding. A more complete description of the U.S. federal income tax consequences of the merger is provided under “The Merger Certain Material U.S. Federal Income Tax Consequences” on page 49.

 

 

This discussion does not address U.S. federal income tax consequences with respect to holders other than U.S. holders nor does it address any consequences arising under U.S. federal non-income tax laws or the laws of any territory, state, local or foreign taxing jurisdictions. Because particular circumstances may differ, we recommend that you consult your own tax advisor to determine the U.S. federal income tax consequences relating to the merger in light of your own particular circumstances and any consequences arising under any state, local or non-U.S. tax laws or tax treaties. This discussion is provided for general information only and does not constitute legal advice to any stockholder.

 

Q:

How do I attend the special meeting?

 

A:

The special meeting will be conducted exclusively online by live audio webcast, in a virtual meeting format. The special meeting live audio webcast will begin promptly at        Eastern Time on        , 2024. Stockholders of record, beneficial owners and invited guests of Asensus who are properly registered to attend the special meeting will be able to attend the special meeting remotely. Record holders are encouraged to register to attend the Special Meeting remotely at         . Record holders will be required to enter the control number located on their proxy card or voting instruction form. Upon completing registration, record holders will be given further instructions for how to access the meeting and vote and submit questions. Depending upon when registering, record holders may receive a separate email, including a unique link that will allow for access to the special meeting and to vote and submit questions. Beneficial owners (i.e., holders in “street name”) may also register to attend the special meeting remotely and should review the information provided by their bank, broker or other holder of record for instructions. Beneficial owners may need to pre-arrange your attendance through your broker, bank or other nominee and request and obtain a valid legal proxy, or have other verifying information from your broker, bank or other nominee, in order to register for and attend the meeting.

 

 

Q:

What vote of Asensus stockholders is required to approve and adopt the merger agreement?

 

A:

Adoption of the merger agreement and approval of the merger proposal requires that holders of our common stock holding a majority of the shares outstanding at the close of business on the record date vote “FOR” the merger proposal. A failure to vote your shares of our common stock or an abstention from voting will have the same effect as a vote “AGAINST” adoption of the merger agreement and the merger proposal. If your shares are held in “street name” by your broker, bank or other nominee and you do not instruct such broker, bank or other nominee how to vote your shares, such failure to instruct your broker, bank or other nominee will have the same effect as a vote “AGAINST” adoption of the merger agreement and approval of the merger proposal.

 

Q:

How does Asensus Board recommend that I vote?

 

A:

The disinterested members of our Board unanimously recommends that our stockholders vote “FOR” each of the proposals.

 

 

For a discussion of the factors that the Asensus Board considered in determining to recommend the approval of the merger agreement, please see the section entitled “The Merger Reasons for Our Boards Recommendation in Favor of the Merger” on page 35. In addition, in considering the recommendations of our Board, you should be aware that some of our directors and executive officers have potential interests that may be different from, or in addition to, the interests of our stockholders generally. For a discussion of these interests, please see the section entitled “The Merger Interests of Our Directors and Executive Officers in the Merger” on page 44.

 

Q:

How will Asensus directors and executive officers vote?

 

A:

We anticipate that our directors and executive officers, which collectively beneficially owned approximately % of our outstanding shares as of the record date, will vote in favor of the merger proposal, although there is no voting agreement in place requiring our directors and executive officers to vote in favor of the merger.

 

Q:

What do I need to do now? How do I vote my shares of Asensus common stock?

 

A:

We urge you to read this entire document carefully, including its appendices and the documents incorporated by reference, and to consider how the merger affects you. Your vote is important, regardless of the number of shares of our common stock you own. You will find instructions on how to submit your vote on page 21 of this proxy statement or on the enclosed proxy card. You can vote your shares by proxy over the internet, by telephone or by mail.

 

Q:

Can I revoke my proxy?

 

A:

Yes. You may revoke your proxy and change your vote at any time before your proxy is voted at the special meeting. To revoke your proxy, you must (1) submit a new proxy by internet or telephone no later than Eastern Time , 2024; (2) complete, sign, date and return a new proxy card to us, which must be received by us before the time of the meeting; or (3) if you are a record stockholder (or a beneficial owner with a legal proxy from the record stockholder) and attend the meeting virtually, take the required steps to revoke your proxy in advance of the vote. Attendance at the meeting will not by itself revoke a previously granted proxy. Unless you are a record holder and decide to vote your shares virtually at the meeting, please revoke your prior proxy at any time before 5:00 p.m. Eastern Time on the day before the date on which the special meeting will be held, in the same way you initially submitted it — that is, by internet, telephone or mail.

 

 

Q:

What does it mean if I get more than one proxy card or voting instruction card?

 

A:

If your shares of our common stock are registered differently or are held in more than one account, you will receive more than one proxy or voting instruction card. Please complete and return all of the proxy cards and voting instruction cards you receive (or submit each of your proxies by telephone or the internet, if available to you) to ensure that all of your shares of our common stock are voted.

 

Q:

What happens if I sell my shares of Asensus common stock before completion of the merger?

 

A:

In order to receive the merger consideration, you must hold your shares of our common stock through completion of the merger. Consequently, if you transfer your shares of our common stock before completion of the merger, you will have transferred your right to receive the merger consideration in the merger.

 

 

The record date for stockholders entitled to vote at the special meeting is earlier than the consummation of the merger. If you transfer your shares of our common stock after the record date but before the closing of the merger, you will have the right to vote at the special meeting but not the right to receive the merger consideration. If you are a stockholder on the record date, we urge you to vote even if you have subsequently transferred your shares.

 

Q:

Should I send in my stock certificates or other evidence of ownership now?

 

A:

No. If the merger is completed, the paying agent will send information to our stockholders of record explaining how to exchange shares of our common stock for the merger consideration. You should not send in your Asensus stock certificates before you receive these transmittal materials. If your shares of our common stock are held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to receive the merger consideration. Do not send in your certificates now.

 

Q:

Where can I find the voting results of the special meeting?

 

A:

We intend to announce preliminary voting results at the special meeting and publish final results in a Current Report on Form 8-K that will be filed with the SEC following the special meeting. All reports that we file with the SEC are publicly available when filed. See “Where You Can Find More Information” on page 84.

 

Q:

Where can I find more information about Asensus?

 

A:

You can find more information about us from various sources described in the section entitled “Where You Can Find More Information” on page 84.

 

Q:

Who can help answer my other questions?

 

A:

If you have more questions about the merger, or require assistance in submitting your proxy or voting your shares or need additional copies of this proxy statement or the enclosed proxy card, please contact our proxy solicitor, Alliance Advisors, toll-free at (844) 858-7383.

 

Q:

Who is paying for this proxy solicitation?

 

A:

We will pay for this proxy solicitation. Our officers and other regular employees may solicit proxies by mail, in person or by telephone or telecopy. These officers and other regular employees will not receive additional compensation. The Company has retained a third party proxy solicitor for the special meeting, and estimates the cost of such solicitor to be approximately $10,000 plus expenses. We will reimburse banks, brokers, nominees, custodians and fiduciaries for their reasonable out-of-pocket expenses incurred in sending the proxy materials to beneficial owners of the shares.

 

 

THE SPECIAL MEETING

 

The Special Meeting

 

Date, Time, Place

 

We will hold a special meeting of stockholders, exclusively online by live audio webcast, in a virtual meeting format, beginning promptly at Eastern Time on , 2024.

 

Purpose

 

The purpose of the special meeting is to consider and vote upon the following proposals:

 

 

1.

Merger Proposal. To approve and adopt the Agreement and Plan of Merger, dated as of June 6, 2024 (as it may be amended from time to time), by and among Asensus, Parent and Merger Sub, pursuant to which Asensus would be acquired by way of a merger and become a wholly-owned subsidiary of Parent. For more information on this proposal, see “The Merger Proposal (Proposal #1)” on page 75.

 

 

2.

Merger-Related Compensation Proposal. To approve, in a non-binding advisory vote, certain compensation that may be paid or become payable to our named executive officers in connection with the merger. For more information on this proposal, see “The Merger-Related Compensation Proposal (Proposal #2)” on page 76.

 

 

3.

Adjournment Proposal. To approve one or more adjournments of the special meeting to a later date or dates if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger proposal at the time of the special meeting. For more information on this proposal, see “The Adjournment Proposal (Proposal #3)” on page 77.

 

The disinterested members of our Board unanimously recommends our stockholders vote “FOR” each of these proposals.

 

Other Business

 

Our management knows of no other matters to be presented at the special meeting. Applicable Delaware law and our bylaws prohibit the transaction at the special meeting of any business that is not stated in the Notice of Special Meeting.

 

Access

 

The special meeting will be conducted exclusively online by live audio webcast, in a virtual meeting format. The special meeting live audio webcast will begin promptly at Eastern Time on , 2024. Stockholders of record, beneficial owners and invited guests of Asensus who are properly registered to attend the special meeting will be able to attend the special meeting remotely and may join the meeting platform fifteen (15) minutes prior to the meeting start time. Record holders may register to attend the special meeting remotely at            . Record holders will be required to enter the control number located on their proxy card or other voting instruction form. Upon completing your registration, record holders will be given further instructions for how to access the meeting and vote and submit questions. Depending upon when registering, record holders may receive a separate email, including a unique link that will allow for access to the special meeting and to vote and submit questions. Beneficial owners (i.e., holders in “street name”) may also register to attend the special meeting remotely and should review the information provided by their bank, broker or other holder of record for instructions. Beneficial owners may need to pre- arrange your attendance through your broker, bank or other nominee and request and obtain a valid legal proxy, or have other verifying information from your broker, bank or other nominee, in order to register for and attend the meeting.

 

Adjournment

 

Although it is not currently expected, we may adjourn the special meeting one or more times, including if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger proposal at the time of the special meeting. The meeting may be adjourned pursuant to a vote of our stockholders on the adjournment proposal.

 

 

All references in our proxy materials to the special meeting include any adjournment or postponement of the special meeting.

 

Record Date Who Can Vote Shares Outstanding

 

Our Board has fixed        , 2024 as the record date for the special meeting. Stockholders of record at the close of business on the record date will be entitled to notice of, and to vote at, the special meeting. Persons who were not stockholders on the record date will not be eligible to vote.

 

At the close of business on the record date, there were                   shares of our common stock issued and outstanding. Our common stock is our only outstanding class of capital stock.

 

How To Cast Your Vote

 

Your vote is important! Please cast your vote as soon as possible by following the instructions on the enclosed proxy card.

 

The disinterested members of our Board unanimously recommends that you vote “FOR” each of the proposals.

 

Instructions for voting your shares depend on how you hold them and whether you wish to vote in-person or by proxy. If you are voting by proxy:

 

 

Stockholders of record, who hold shares registered in their own name, can vote by signing, dating and returning the enclosed proxy card in the postage-paid return envelope, or by telephone or via the internet, following the easy instructions shown on the enclosed proxy card.

 

 

Beneficial owners, who own shares through a bank, broker or other nominee, can vote by returning the voting instruction form or by following the instructions for voting via telephone or the internet, as provided by the bank, broker or other nominee. If you own shares in different accounts or in more than one name, you may receive different voting instructions for each type of ownership. Please vote all your shares.

 

If you are a stockholder of record or a beneficial owner who has confirmed access to the special meeting through your bank, broker or other nominee, and to vote your shares at the special meeting, you may choose to vote virtually at the special meeting. Even if you plan to attend the special meeting, please cast your vote as soon as possible by using the proxy card.

 

If you have any questions or need assistance voting, please contact Alliance Advisors, our proxy solicitor assisting us in connection with the special meeting, toll-free at (844) 858-7383.

 

Proxies will be voted as directed therein. If you are a record holder and sign a proxy card or submit a proxy by telephone or over the internet and do not specify how your shares are to be voted, your shares will be voted “FOR” the merger proposal, “FOR” the merger-related compensation proposal and “FOR” the adjournment proposal.

 

Revoking Your Proxy

 

Any stockholder giving a proxy may revoke it and change its vote at any time before the proxy is voted at the special meeting. To revoke a proxy, you must (1) submit a new proxy by internet or telephone no later than Eastern Time on , 2024; (2) complete, sign, date and return a new proxy card to us, which must be received by us before the time of the meeting; or (3) if you are a record stockholder (or a beneficial owner with a legal proxy from the record stockholder) and attend the meeting virtually, take the required steps to revoke your proxy in advance of the vote.

 

Attendance at the meeting will not by itself revoke a previously granted proxy. Unless you are a record holder and decide to vote your shares virtually at the meeting, please revoke your prior proxy by 5:00 p.m. Eastern Time on the day before the date on which the special meeting will be held, in the same way you initially submitted it — that is, by internet, telephone or mail. Without prior coordination with their bank or broker or other intermediary, beneficial owners (i.e., holders in “street name”) will be unable to revoke or modify a previously delivered proxy, through attendance virtually at the special meeting. These actions should be undertaken through advance coordination with the bank, broker or other nominee.

 

 

Voting By Our Directors and Executive Officers

 

We anticipate that our directors and executive officers, which collectively beneficially owned and/or have the right to vote approximately    % of our outstanding shares as of        , 2024, will vote in favor of the merger proposal. There is no voting agreement in place requiring our directors and executive officers to vote in favor of the merger.

 

Voting Procedures and Technicalities

 

One Vote Per Share

 

Each share of our common stock is entitled to one vote on each matter to be voted upon at the special meeting. Holders of our common stock are not entitled to cumulative voting rights on any proposal to be presented at this special meeting.

 

Quorum

 

The holders of one-third (33.33%) of the shares of our common stock outstanding and entitled to vote, present in person or represented by proxy at the special meeting, will constitute a quorum for the transaction of business. The holders of least                   shares of our common stock will be a quorum for a vote to be taken on the merger proposal and the merger-related compensation proposal.

 

If a quorum is present when the special meeting is convened, the stockholders present may continue to transact business until adjournment, even if the withdrawal of stockholders originally present leaves less than a quorum.

 

Abstentions

 

If a stockholder indicates on their proxy that they wish to abstain from voting, including banks, brokers or other nominees holding their customers’ shares who cause abstentions to be recorded, these shares are considered present and entitled to vote at the special meeting and those shares will count toward determining whether or not a quorum is present at the meeting. However, an abstention will have the same effect as a vote “AGAINST” the merger proposal, the merger-related compensation proposal and the adjournment proposal.

 

Shares Held in Street Name

 

If you hold your shares in “street name” (i.e., you own your shares beneficially in the name of a stock brokerage account or by a bank, trust or other nominee), we request that you provide your broker, bank or other nominee with instructions on how you would like them to vote your shares using the voting instruction form they provide to you. If you are a street name holder and do not provide timely voting instructions, your broker, bank or other nominee will not have the authority to vote on your behalf on any of the proposals presented at the special meeting. If voting instructions are not received from the beneficial owner, banks, brokers and nominees are permitted to submit proxies to vote shares held in street name only on “routine proposals.” This is sometimes referred to as a “broker non-vote.” However, none of the proposals to be voted upon at the special meeting — the merger proposal, the merger related compensation proposal or the adjournment proposal — are routine proposals. Accordingly, there should be no broker non-votes at the special meeting.

 

Because of the vote required to approve the merger proposal, if a street name holder does not provide voting instructions on the merger proposal and consequently that street name holder’s shares are not voted, or are counted as a broker non-vote on the merger proposal, it will have the same effect as a vote “AGAINST” the merger proposal. A broker non-vote will have no effect for purposes of determining the outcome of the vote on the merger-related compensation proposal or the adjournment proposal, provided that a quorum is otherwise present.

 

 

Solicitation of Proxies

 

Our Board is soliciting your proxy, and we will bear the cost of this solicitation of proxies. This includes the charges and expenses of brokerage firms and others for forwarding solicitation material to beneficial owners of our outstanding common stock.

 

The solicitation of proxies is being made primarily by mail and through the internet, but directors, officers, employees, and contractors retained by the Company may also engage in the solicitation of proxies by telephone. The cost of soliciting proxies will be borne by the Company. The Company has retained the services of Alliance Advisors to assist in the solicitation of proxies, at a cost to the Company for basic services of approximately $10,000 plus expenses. Depending upon the circumstances, the scope of services to be provided by Alliance Advisors may expand, and cost would be expected to increase correspondingly. In addition, the Company may reimburse brokers, custodians, nominees and other record holders for their reasonable out-of-pocket expenses in forwarding proxy materials to beneficial owners.

 

 

THE MERGER

 

This discussion of the merger is qualified in its entirety by reference to the merger agreement, which is attached to this proxy statement as Appendix A and incorporated into this proxy statement by reference. You should carefully read and consider the entire merger agreement, which is the legal document that governs the merger, because this document contains important information about the merger and how it affects you.

 

Parties Involved in the Merger

 

Asensus Surgical, Inc. is a Delaware corporation. We are headquartered in Durham, North Carolina. Our common stock is listed on the NYSE American exchange under the symbol “ASXC.”

 

Parent is a California corporation and a wholly-owned subsidiary of KARL STORZ.

 

Merger Sub is a wholly-owned subsidiary of Parent formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement.

 

The Merger and Its Effects

 

If the merger agreement is approved and adopted by our stockholders and the other conditions to the closing of the merger are either satisfied or waived, Merger Sub will be merged with and into Asensus, and the separate corporate existence of Merger Sub will cease. Asensus will be the surviving corporation in the merger and will continue its corporate existence as a Delaware corporation and a wholly-owned subsidiary of Parent. The effective time will occur upon the filing of a certificate of merger with the Secretary of State of the State of Delaware (or at such later time as we, Parent and Merger Sub may agree and specify in the certificate of merger).

 

Upon the terms and subject to the conditions of the merger agreement, at the effective time of the merger, each share of our common stock issued and outstanding immediately before the effective time of the merger (other than cancelled shares and dissenting shares) will be converted into the right to receive $0.35 in cash, without interest and less any applicable withholding taxes. At the effective time of the merger, our current stockholders will cease to have ownership interests in the company or rights as its stockholders.

 

Therefore, our current stockholders will not participate in any of our future earnings or growth and will not benefit from any future appreciation in our value.

 

Our common stock is currently registered under the Exchange Act and is quoted on the NYSE American under the symbol “ASXC.” As a result of the merger, Asensus will cease to be a publicly traded company and will be a wholly-owned subsidiary of Parent. Following the consummation of the merger, our common stock will be delisted from the NYSE American and deregistered under the Exchange Act, and Asensus will no longer be required to file periodic reports with the SEC with respect to our common stock, in each case in accordance with applicable law, rules and regulations.

 

The merger will be accounted for as a “purchase transaction” for financial accounting purposes.

 

Asensus Without the Merger

 

If the merger agreement is not approved and adopted by our stockholders or if the merger is not consummated for any other reason, our stockholders will not receive any payment for their shares of our common stock. Instead, we will remain a public company, our common stock will continue to be listed and traded on the NYSE American and registered under the Exchange Act and we will continue to file periodic reports with the SEC.

 

Because the Company is unlikely to be able to secure needed capital following a failed merger vote and because of the Company’s obligation to repay the amounts due under the Note to KARL STORZ, and the security interests supporting such obligation to pay, if the merger agreement is not approved and adopted by our stockholders we will be forced to seek bankruptcy protection in order to maximize the value of our assets as we seek an orderly liquidation of the Company.

 

 

We could also face delisting of the common stock on the NYSE American.

 

If the merger agreement is terminated, under specified circumstances, we may be required to pay Parent a termination fee, as described under “The Merger Agreement Termination” on page 70.

 

Background of the Merger

 

Introduction

 

The Company is a medical device company that is digitizing the interface between the surgeon and patient to pioneer a new era of surgery that it refers to as Performance-Guided Surgery™, or PGS, by unlocking clinical intelligence to enable surgeons to deliver consistently superior outcomes to patients. Built upon the foundation of digital laparoscopy and laparoscopic minimally invasive surgery, or MIS, (which remains the gold standard of surgery today), the Company is pioneering PGS to increase surgeon control and reduce surgical variability. Through the integration of machine vision, Augmented Intelligence, and deep learning capabilities throughout the surgical experience delivered via the Senhance® Surgical System, combined with the Intelligent Surgical Unit™, or ISU™, the Company is holistically addressing the current clinical, surgeon performance (fatigue and ergonomics), and economic shortcomings that impact surgical outcomes in a value-based healthcare environment. The Company is also incorporating all of these capabilities into its next generation robotic system called the LUNA™ Surgical System and referred to in this proxy statement as the LUNA System.

 

The industry in which the Company competes is highly competitive, subject to change and significantly affected by new product introductions and other activities of industry participants. Although the Company possesses only the second surgical robotic system, the Senhance System, to receive 510(k) clearance from the FDA, many competitors have significantly greater financial and human resources than the Company does, and have established reputations with the Company’s target customers, as well as worldwide distribution channels that are more established and developed than those of the Company. Reference is made to the Company’s Annual Reports on Form 10-K, filed with the SEC, for a discussion of the Company’s competitive landscape, including changes over the past few years. There were new entrants in the market for robotic surgery in 2023 and 2022, and some progress by existing competitors in 2023. The Company believes that its focus on the laparoscopic market and its PGS initiative, along with its LUNA System development efforts, have helped the Company remain competitive in this growing field. The Company’s focus in 2021 through 2023 was on the development of its next-generation robotic system, the LUNA System, and its other initiatives to grow its commercial business. However, because of the Company’s small size and inability to attract the capital investment necessary to sustain the Company until cash flow breakeven, the Company’s strategic plan also included finding and developing formal relationships or significant collaborations with one or more large, well-capitalized medical device industry participants.

 

2021

 

In 2021 the Company established development plans for LUNA, its next generation surgical robotic system, and focused its internal development efforts on instruments and the enhancement of its ISU. In early 2021 the Company’s stock price increased significantly and the Company was able to successfully raise close to $170 million in the first quarter of 2021 from a registered direct offering, an underwritten public offering, exercises of outstanding Series B, C and D common stock warrants and proceeds from the Company’s then-existing “at the market,” or ATM, offering under its then-existing Controlled Equity Offering Sales Agreement with one sales agent.

 

Throughout 2021, senior management engaged in frequent discussions with four to five medical device and instrument manufacturers regarding integration of third-party instruments and other medical products with both the Company’s existing products and/or potential incorporation into the LUNA System.

 

The Company’s Chief Executive Officer, Anthony Fernando, also held periodic meetings with representatives of three global medical device manufacturers, referred to in this “Background of the Merger” as Company A, Company B and Company C, and a non-U.S. based private equity firm (referred to in this “Background of the Merger” as Financial Sponsor D) regarding the possibility of strategic collaboration arrangements, which could include, for each of the four entities, partnering opportunities, collaborations, OEM development or sales and distribution arrangements. These meetings did not result in any indications of interest.

 

 

The Asensus Board held 12 Board meetings in 2021 at which it received updates and information regarding these discussions, and received operational updates, approved capital raising transactions and discussed the Company’s strategic plan. The Nominating and Corporate Governance Committee of the Board, working with senior management, evaluated the skills and qualifications of the Board and sought to refresh the Board with additional members with medical device industry management experience and commercial experience. These activities led to the recruitment of Kevin Hobert and Elizabeth Kwo, M.D. to join the Board in July 2021. In October 2021, Paul LaViolette, the long-time Chairman of the Asensus Board announced his intention to resign from the Asensus Board. David Milne was appointed as Board Chairman at the October 27, 2021 Board meeting.

 

The Company’s stock price remained stable through June 2021 and the Company filed a well-known seasoned issuer, or WKSI, shelf registration statement in May 2021 so that it could be prepared to implement capital-raising transactions if and when needed. This included implementation of a new Controlled Equity Offering Sales Agreement with three sales agents under which a modest amount of additional funds were raised in late 2021.

 

In June 2021, the CEO reported to the Asensus Board that the discussions with Financial Sponsor D had stalled over a discussion of milestone payments and intellectual property ownership matters. No further conversations were held with Financial Sponsor D.

 

The Company’s stock price began falling in mid-2021, which negatively impacted the Company’s ability to pursue capital-raising transactions. The Asensus Board and management began to explore ways to reduce the Company’s quarterly cash burn while continuing to pursue its strategy. By December 31, 2021, the Company’s closing stock price had declined to $1.04 per share.

 

In September 2021, the Company announced it had received 510(k) clearance for expanded ISU features. Its commercial activities for the balance of the year focused on increasing placements and sales of the Senhance System, assisting customers in increasing numbers of surgical cases performed using the Senhance System, and driving sales and use of the ISU with such enhanced features.

 

On November 17, 2021, the Company’s CEO and Vice President, Europe held a meeting with representatives of KARL STORZ to discuss possible supply activities related to cameras and potential for OEM of instruments. This was a routine meeting that was part of a series of meetings dating back to 2016 in which the parties discussed potential supply and manufacturing agreements. The CEO informed the Asensus Board of this meeting at a regularly scheduled December 2021 Board meeting.

 

2022

 

In January 2022, the Company’s management presented an update on the Company’s PGS initiative at the J.P. Morgan Healthcare conference. The Company’s business activities focused on increasing Senhance System placements, increased utilization of the Senhance System by existing customers, ISU and LUNA System development efforts, and collecting surgical data in its TRUST™ registry as it continued to refine its digital laparoscopy features and PGS initiative. The Asensus Board held a number of detailed sessions in February, April, July, September and October 2022 devoted to a review and refinement of the Company’s strategic approach and three-year plan, including a focus on developing business combination opportunities. The April 2022 Board meeting was a formal strategic planning session. Invited guests included operations and investor relations consultants. The session included a detailed overview of the competitive landscape in robotic surgery and the Company’s position in such industry. Prior to the April and October 2022 Board meetings, the CEO and Board Chairman met to discuss the strategic plan and Board presentations. During 2022, the Asensus Board also continued to explore other Company initiatives including digital laparoscopy advances and the value of increasing case data harnessed in the Company’s PGS initiative via the ISU and TRUST registry. During the April Board meeting, management and the Board discussed potential investors, strategic partners, and potential acquirers for the Company. Candidates were identified based on the experience and input of the Board and management, a review of industry participants and potential participants, a review of healthcare technology focused investors, and input from investment banking professionals and industry consultants. This discussion informed and focused ongoing efforts to engage potential investors, collaborators, and acquirers.

 

 

In the first quarter of 2022, the Company’s stock price continued to decline, to $0.66 by March 31, 2022. In connection with its filing of its Annual Report on Form 10-K for the year ended December 31, 2021, the Company was no longer a WKSI, therefore, it filed a shelf registration statement to replace its WKSI shelf registration, and entered into a new Controlled Equity Offering Sales Agreement for an ongoing ATM offering with two sales agents. The Company did not raise meaningful capital under its ATM offering in 2022 because of the continued decline in its stock price.

 

In accordance with its strategic plan, the Company’s management continued to hold frequent in-person and virtual meetings with representatives of Company A, Company B and Company C during 2022. It held one virtual meeting with Company A in October 2022 to discuss an overview of the ISU, digital laparoscopy progress and a regulatory update. It participated in a total of seven monthly virtual meetings with different representatives of Company B, primarily from the robotics group and business development team, from March to late August 2022 to present digital laparoscopy, explore a possible instrumentation collaboration and discuss other partnering opportunities, including intellectual property licensing opportunities. The meeting held on August 30, 2022, focused on three potential scenarios regarding collaboration over instrument development and manufacturing.

 

The Company held one in-person meeting with the senior management and business development team at Company C in August 2022 to provide a detailed overview of the Company’s products, including the LUNA System in development. None of these meetings and presentations led to any significant indications of interest or other collaboration, partnering or business combination proposals.

 

Senior management representatives of the Company met four times, three in-person and one virtual, in May, June, September and December of 2022 with representatives of KARL STORZ. The first meeting, held on May 29, 2022 took place in Milan, Italy. The Company provided an overview of digital laparoscopy and the ISU, then-current instruments and a LUNA development update. Representatives of KARL STORZ were able to use and explore the capabilities of the ISU and Senhance System.

 

The next meeting between the parties was held on June 15 and 16, 2022, again in Milan, Italy. Representatives were Stephan Abele, Debora Botturi, Andrew Warning, and Paul Czekanowski from KARL STORZ and Mr. Fernando, Dustin Vaughn, Motti Frimer, Wouter Donders, Thorsten Brandt, Nick Summitt, and Stefano Pomati from the Company. This marked the first substantive discussion of a potential partnering relationship for LUNA instruments, a possible OEM relationship related to the manufacturing of the ISU, and sales force relationships.

 

On September 1, 2022, Mr. Abele and Ms. Botturi of KARL STORZ visited the Company’s headquarters in Durham, North Carolina. The purpose of the meeting was to introduce KARL STORZ to the Company and meet the Company’s leadership team, including Mr. Vaughan, Daniel Odermatt, Mr. Summitt and Mr. Frimer and continue the discussions regarding a collaboration on the ISU manufacturing and LUNA instruments development.

 

On September 14, 2022, the Asensus Board held a mid-quarter Board call and discussed the interactions and potential collaboration for the ISU, instruments and/or the LUNA System with KARL STORZ, Company B and with a global instrument manufacturer.

 

The final 2022 meeting was a virtual meeting between Mr. Fernando and Mr. Abele held on December 30, 2022. The parties continued their discussion regarding the potential collaboration opportunity and committed to meet in Los Angeles, California in early 2023.

 

In addition to these discussions with third parties, including KARL STORZ, during 2022 the Company expanded its senior leadership team, opened new offices in Israel and Japan, and investigated possible manufacturing and commercial agreements with third parties.

 

 

Beginning in September 2022, the Company’s management and consultants began to develop materials to announce the LUNA system development plans in a public forum. Prior to this time, the Company’s disclosure regarding its next generation robotic system was limited, as the Company evaluated the risks, rewards and anticipated costs related to the development, regulatory approval for and commercialization of the LUNA System.

 

The Asensus Board held eight meetings in 2022. As noted, the focus of many of these meetings was on the Company’s strategic approach, partnering opportunities and the competitive landscape. On October 24, 2022, Mr. Fernando updated the LUNA System financial model and discussed the model with Board Chair David Milne prior to an upcoming Board meeting. That Board meeting was held on October 26-27, 2022, at which the LUNA System financial model, including assumptions, limitations and risks were discussed in detail. The discussions included both a stand-alone development model and a potential strategic partnering or business combination transaction with one of the companies with which the Company representatives had been meeting.

 

The Company’s stock price continued to decline during 2022 and the Company recognized that, absent an ability to raise significant additional capital, its financial statements and SEC filings would reflect uncertainty regarding the Company’s ability to continue as a going concern.

 

On December 30, 2022, the closing price of the Company’s common stock was $0.35 per share.

 

2023

 

From early January through March 2023, the CEO and Board Chairman had weekly calls to discuss the operating plans and an upcoming Investor Day.

 

On January 11 and 12, 2023, Mr. Fernando and Mr. Vaughn met in Los Angeles, California with Mr. Abele, Ms. Botturi, Helene Wahl and Mark Green of KARL STORZ to discuss and negotiate a term sheet for a collaboration agreement related to the development, manufacture and sales of instruments on the LUNA System platform, and the manufacture and sales of the Company’s ISU. The potential for a collaboration on instruments and the ISU was first discussed. Discussions and negotiations of the term sheet continued for the rest of January and into February 2023. The Company engaged Ballard Spahr LLP, or Ballard Spahr, to provide legal advice with respect to the term sheet and the collaboration agreement. The Company and representatives of Ballard Spahr negotiated the term sheet with representatives of KARL STORZ from January 17, 2023, until a Memorandum of Understanding (MOU) was signed with an affiliate of KARL STORZ on February 13, 2023.

 

The MOU set forth the companies’ intentions to (1) have KARL STORZ market and sell the ISU as a standalone device together with the KARL STORZ IMAGE1 S™ imaging system and OR1™ integration product offering, (2) jointly develop the integration of the ISU into KARL STORZ’s laparoscopic vision system, and (3) jointly collaborate on developing next generation instrumentation to be used in the LUNA System and KARL STORZ’s surgical platform. The MOU was publicly announced as part of the Company’s Investor Day on February 21, 2023.

 

On January 30, 2023, and continuing into February and March 2023, Mr. Fernando had multiple calls with executives of Company B to arrange meetings to provide an overview to senior executives of Company B.

 

On February 7 and 8, 2023, the Asensus Board Chairman and Board members Richard Pfenniger and Andrea Biffi met with Mr. Fernando in Durham, North Carolina to continue discussing strategic alternatives.

 

Also at the Investor Day on February 21, 2023, the Company introduced its next generation surgical robotic system, the LUNA System and the ongoing developments in its PGS platform. In addition, the Company disclosed that the Asensus Cloud was being introduced to assist in pre‑operative surgical planning, post-surgical performance analytics and best practices guidance, and enable the extraction and aggregation of insights from surgical data. The Company disclosed that it anticipated, at that time, that it would spend the rest of 2023 refining and finalizing the design builds and conducting testing on the ISU enhancements for standalone use, reaching design freeze on the LUNA System in the first quarter of 2024 and making regulatory notices and submissions by the end of 2024. The Company anticipated a commercial pilot launch of the LUNA System in the second half of 2025.

 

 

Following the negotiation of the MOU between the Company and an affiliate of KARL STORZ, representatives of Ballard Spahr and representatives of Ropes & Gray LLP, as counsel to KARL STORZ, began negotiating the terms of a Joint Collaboration and Development Agreement (the “Collaboration Agreement”). Ballard Spahr provided a first draft of the agreement to KARL STORZ in early March 2023.

 

A regularly scheduled Board meeting was convened on April 26 and 27, 2023 in Durham, North Carolina. The Asensus Board received presentations from three investment banking firms related to capital raising and strategic transaction capabilities. Following such presentations, the Asensus Board engaged in a business development and strategy review of the Company’s prospects. Ongoing discussions with KARL STORZ, Company A, Company B and Company C were evaluated as to likelihood of success, next steps and obstacles. The Board and management also discussed the risks inherent in the Company’s ability to raise needed capital given the market conditions and the Company’s stock price. The Asensus Board also began a detailed discussion of alternatives if none of the discussions resulted in actionable transactions, including a potential restructuring and liquidation of the Company to return some value to stockholders.

 

Throughout April, May and June of 2023, representatives of the Company, Ballard Spahr, KARL STORZ and Ropes & Gray participated in weekly or bi-weekly conference calls and exchanged drafts of the Collaboration Agreement as they worked to negotiate and document the transactions contemplated by the MOU between the Company and an affiliate of KARL STORZ. The principal points of negotiation revolved primarily around intellectual property license and ownership matters, robotic surgery product offerings and manufacturing aspects. The parties were ultimately unable to reach agreement on terms of the Collaboration Agreement. The Company filed a Current Report on Form 8-K on June 30, 2023 to disclose the cessation of discussions with KARL STORZ.

 

On May 12 and 24, 2023, representatives of the Company presented an overview of the Company’s assets and capabilities to executives of Company B.

 

On June 9, 2023, senior executives of Company B met with representatives of the Company, including Mr. Fernando, in Durham, North Carolina. During the meeting, the Company representatives provided an overview of the Company, its Senhance System, its LUNA System in development, instrument portfolios, the opportunities for integration of the instrument offerings of both companies and an overview of the Company’s digital and visualization capabilities.

 

On July 27, 2023, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers signatory thereto (the “Purchasers”), pursuant to which the Company agreed to issue and sell to the Purchasers in a registered direct offering (the “Offering”) (i) 23,809,524 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), and (ii) common warrants to purchase up to an aggregate of 23,809,524 shares of Common Stock (the “Warrants”). Each share of Common Stock and accompanying Warrant was sold at a price of $0.42 per share and accompanying Warrant for aggregate gross proceeds of $10 million before deducting the placement agent’s fees and the offering expenses. The Company disclosed that the net proceeds of this Offering would be used for general corporate purposes, including working capital, product development and capital expenditures.

 

The Company leadership team also held a number of meetings with potential fund and private equity investors during 2023. Mr. Fernando held frequent calls with Board Chair David Milne to discuss challenges and opportunities that arose from these discussions. None of these discussions resulted in investments in the Company.

 

Mr. Fernando held monthly calls with representatives of Company B in September, November and December of 2023 to discuss updates and an overview of the LUNA System development.

 

At a regularly scheduled meeting on September 29, 2023, the Asensus Board and management discussed various potential business development and strategic transaction alternatives, as well as a continued discussion of the need for additional financing to continue the Company’s operations, including development of the LUNA System, particularly given the disappointing results of the July 2023 capital offering. The Board’s focus was on finding an opportunity for the Company to be acquired given the significant capital needed to advance the product development efforts and the lack of a realistic ability to raise such capital for the Company to continue on a stand-alone basis. Ongoing expense reduction activities also continued into the fourth quarter of 2023. The Asensus Board discussed the critical importance of the December 2023 animal lab demonstrations scheduled as a crucial step in the LUNA System development. Mr. Fernando informed the Asensus Board that representatives of KARL STORZ, Company A, Company B and Company C, as well as different instrument manufacturers, were invited to the December 2023 animal lab demonstrations.

 

 

On October 25, 2023, executives of KARL STORZ including Thorsten Molitor, Stefan Ort, Bernd Hermann, Stefan Rehbein, Jose Luis Moctezuma and Ms. Botturi met with the senior leadership team of the Company. The discussions focused on the Company’s LUNA System.

 

On July 24, 2023 and October 25, 2023, the Company’s CEO held virtual meetings with representatives of Company C to provide updates on the LUNA System development. Representatives of Company C met with the Company on November 10, 2023, for a LUNA System demonstration. Representatives of Company C were invited to the Company’s December animal lab demonstration at that time. An additional visit occurred on December 6, 2023, in California to discuss potential partnering opportunities and the Company’s need to move forward with a defined timeline for future discussions.

 

On July 24, 2023, the Company’s CEO met with representatives of Company A in Melbourne, Australia at an industry conference to discuss setting up a meeting of the companies’ digital teams. Company A was invited to the Company’s December 2023 animal lab demonstration.

 

Beginning in late October 2023 and continuing weekly or bi-weekly through the remainder of 2023, Mr. Fernando met with a subcommittee of the Asensus Board consisting of Board Chair David Milne, Richard Pfenniger and Andrea Biffi (a “Strategy Committee”) to discuss financing alternatives and strategic business combination or collaboration possibilities.

 

On November 10, 2023, an executive and a surgeon consultant of Company C met with the senior leadership team of the Company, including Mr. Fernando, at its Durham, North Carolina headquarters for an all-day meeting that included a demonstration of the LUNA System in development and the Company’s ISU product.

 

At a Board meeting held on November 29, 2023, the Asensus Board discussed the planned animal lab demonstrations and invited guests, the results of the meetings held with the potentially interested companies and the alternatives facing the Company. The Asensus Board authorized management and counsel to begin compiling information in earnest to assess the possible restructuring and/or orderly liquidation of the Company if no alternatives progressed to a proposed transaction.

 

The Company held its animal lab demonstrations for the LUNA System for the full week of December 11, 2023. Representatives of each of Company A, Company B, Company C and KARL STORZ attended. Following the demonstrations, Mr. Fernando requested indications of interest in the pursuit of a strategic transaction with the Company by mid-January 2024.

 

On December 29, 2023, the Company’s stock price closed at $0.32 per share.

 

2024

 

Update calls with the Strategy Committee of the Asensus Board occurred on January 16, 23, 26 and 30, 2024 to convey the initial impressions and other information received by the potentially interested parties. In addition, a Board meeting was held on January 5, 2024 to provide the Asensus Board with the information compiled to date on the potential restructuring or liquidation of the Company in bankruptcy (Plan B). The Asensus Board provided additional direction to the Company and authorized the retention of a restructuring consultant to assist in planning for a possible bankruptcy scenario. Representatives of Ballard Spahr provided some recommendations to the Company for financial consultants to assist in Plan B evaluation.

 

Mr. Fernando met with representatives of Company A at the J.P. Morgan Healthcare Conference on January 9, 2024 to discuss any potential partnering opportunities. A follow-up call was held on January 26, 2024.

 

 

The Company’s management held calls with representatives of Company B on seven occasions in January 2024, to follow-up on partnering opportunities.

 

Mr. Fernando held calls on four occasions in January 2024 with representatives of Company C to discuss the animal lab impressions and potential collaboration activities. On January 24, 2024, Company C notified the Company of its decision not to pursue a transaction with the Company and conversations ceased.

 

The Asensus Board met in Durham, North Carolina on February 6 and 7, 2024 for its regularly scheduled meeting. Mr. Fernando presented the information received to date from the potentially interested companies, including potential interest from KARL STORZ. An additional Board update meeting occurred on February 9, 2024. At this point, the Asensus Board requested weekly update calls to remain current on the various discussions and monitor the Company’s cash position. The possible Plan B scenario was discussed at each meeting.

 

On February 12, 2024, representatives of KARL STORZ met with Mr. Fernando and other representatives of the Company in Durham, North Carolina to discuss a potential sale transaction and certain KARL STORZ preliminary due diligence requests with respect to the LUNA system and its regulatory pathway.

 

Mr. Fernando met with Mr. Milne on February 14, 2024 and with the Asensus Board on February 16, 2024, to review the results of the meetings with Company A, Company B and KARL STORZ. Mr. Fernando noted that Company A was still considering its strategy and that a meeting was scheduled with Company A later in February. Mr. Fernando reported on the due diligence session with KARL STORZ indicating that the KARL STORZ representatives stated that they would evaluate the information provided.

 

On February 21 and 22, 2024, senior executives of Company B met with senior leadership of the Company at its Durham, North Carolina headquarters. The focus of the meetings was on the Company’s digital products and technology foundation, the regulatory pathway for the Company’s products, a tissue lab evaluation and extensive discussions regarding the LUNA System and collaborative pathways between the parties. Mr. Fernando had a follow-up conversation with representatives of Company B on February 26, 2024.

 

The Asensus Board held update calls on February 16, 23 and 29, 2024 at which these alternatives and Plan B were discussed. At the February 16, 2024 meeting, Mr. Fernando presented a financing alternative suggested by an investment banking firm regarding a warrant exchange. No decision was made at that time. At the February 23, 2024 meeting, Mr. Fernando reported on the additional due diligence questions raised by KARL STORZ, primarily related to tax and intellectual property topics. At the February 29, 2024 meeting, Mr. Fernando described the ongoing due diligence process by KARL STORZ, informed the Asensus Board of Company A’s decision not to pursue a transaction with the Company, and updated the Asensus Board on liquidity alternatives including the warrant exchange program, use of the Company’s then-existing “at the market,” or ATM, offering under its then-existing Controlled Equity Offering Sales Agreement with one sales agent or receipt of bridge funding from an acquiring party.

 

In the first week of March 2024, Mr. Fernando met with Michael Tröndle and Thorsten Molitor of KARL STORZ in Basel, Switzerland. The KARL STORZ executives described the due diligence work conducted to date and noted that a written proposal from KARL STORZ would likely be forthcoming by the end of the month.

 

At a Board call on March 8, 2024, Mr. Fernando updated the Asensus Board on potential transactions with Company B and KARL STORZ. Mr. Fernando also discussed the tax credit work relating to net operating losses continuing, the plans of KARL STORZ for next steps, the legal due diligence questions presented by KARL STORZ and the possible terms of a bridge funding. The Asensus Board also authorized the engagement of Jefferies, which thereafter was engaged as Asensus' financial advisor.

 

A letter of intent dated March 19, 2024 was delivered to the Company by KARL STORZ on March 20, 2024. A call to update the members of the Asensus Board was held on March 21, 2024. All Asensus Board members and representatives from Ballard Spahr LLP and Jefferies attended the meeting. Mr. Fernando summarized the draft letter of intent provided by KARL STORZ. The Asensus Board and advisors discussed the terms of the letter, including the merger consideration of $0.35 per share, the structure of the transaction, the $20 million bridge funding, the exclusivity period, key conditions to the closing and timeline. The Asensus Board particularly discussed the 10-week due diligence timeline, the transaction’s risks to the Company, the consideration offered and the structure of the proposed bridge funding. Mr. Fernando discussed a potential timeline for the transaction. Mr. Fernando was charged with relaying the Asensus Board’s comments to KARL STORZ, focused on the due diligence timeline, bridge funding that provided funding to the Company during the due diligence period and the consideration offered. The Asensus Board also discussed the advisability of establishing a transaction committee of disinterested independent directors to assist management in reviewing transaction documents and other transaction terms, and to actively monitor the need for the Company to pursue Plan B. A Transaction Committee comprised of David Milne, Richard Pfenniger and Kevin Hobert was appointed.

 

 

On March 21, 2024, Mr. Fernando informed the Asensus Board that Company B had informed Asensus it would not pursue a transaction with Asensus.

 

On March 22, 2024, Mr. Fernando contacted representatives of UBS, who had been retained by KARL STORZ as financial advisor with respect to the proposed transaction, to provide the feedback that the Company requested a more expeditious diligence timeline, additional per share consideration and more favorable terms for the proposed bridge funding, including that such funding would need to be extended to the Company during the due diligence period.

 

On March 23, 2024, KARL STORZ delivered an updated letter of intent to the Company, which reiterated proposed merger consideration of $0.35 per share, a 10-week due diligence period and bridge funding through a promissory note providing $5 million of financing to the Company on a monthly basis commencing upon the signing of definitive documentation for the proposed transaction. Mr. Fernando contacted representatives of UBS to reiterate the Board’s views that the diligence period was too long and that the bridge financing would need to be available during the due diligence period.

 

KARL STORZ delivered an updated letter of intent to the Company on March 26, 2024. In connection with delivery of the updated proposal, representatives of UBS noted that the merger consideration of $0.35 per share represented KARL STORZ’s “best and final” proposal to the Company and that the 10-week due diligence timeline was a requirement for KARL STORZ. The Asensus Board discussed the timeline, exclusivity period, and its implications, and the bridge funding proposed, which included $1 million upon execution of the promissory note for the bridge funding, as well as up to nine (9) additional installments of $1 million for each extension of the exclusivity period, $5 million upon the Company’s election following execution of a merger agreement, and $5 million upon the Company’s election one month following the execution of a merger agreement. The Asensus Board and counsel discussed the disclosure obligations and alternatives regarding the fully secured bridge funding and the letter of intent, to give context to the bridge funding. The Asensus Board provided management with authorization to finalize the letter of intent and negotiate the related bridge funding documentation with KARL STORZ. The Asensus Board also received an update on its Plan B activities, including participation from bankruptcy and restructuring counsel from Ballard Spahr.

 

On March 28, 2024, the Company executed the letter of intent from KARL STORZ substantially in the form provided on March 26, 2024. Also on March 28, 2024, the Asensus Board held a meeting to discuss the bridge funding and due diligence process. The Asensus Board also reviewed the cash flow outlook presentation prepared by its Plan B financial consultant. The Asensus Board discussed the public disclosure of the non-binding letter of intent and anticipated next steps.

 

Representatives of Ropes & Gray provided the draft Secured Promissory Note and Intellectual Property Security Agreement (the “IP Security Agreement”) to Ballard Spahr on March 28, 2024. Over the next five days, the parties negotiated the Note and IP Security Agreement and the Company drafted a press release to announce the entry into the bridge funding documents and the non-binding letter of intent. The principal points negotiated were the scenarios in which the Note would need to be repaid, the time periods in which the Note would need to be repaid, the presence or absence of a prepayment penalty, the security interest provisions and the timeline and process for receiving advances under the Note. The Asensus Board approved the Note and IP Security Agreement on April 2, 2024, and the Company issued a press release related to the non-binding letter of intent and bridge funding and filed a Current Report on Form 8-K to report entry into Note and IP Security Agreement on April 3, 2024.

 

 

The exclusivity period began on March 28, 2024, and was extended by KARL STORZ on a weekly basis by written notice on the next nine Thursdays. With each extension, KARL STORZ provided the Company with a $1 million payment under the Note. The exclusivity period expired on June 6, 2024.

 

From April 3, 2024 until June 6, 2024, KARL STORZ conducted its due diligence review of the Company.

 

During this due diligence period, the Asensus Board met on April 12, 2024, April 19, 2024 and April 30, 2024. During such calls, the Asensus Board received updates on the KARL STORZ transaction, and reviewed the Company’s financial model, cash status, ongoing capital requirements and long-term strategic plan. The Company also continued its Plan B preparations in the event the discussions with KARL STORZ were terminated.

 

On May 9, 2024, Ropes & Gray provided Ballard Spahr with the first draft of the merger agreement. The Company executive team worked with the Company’s advisors in its review of the merger agreement draft. The principal areas of focus were (1) the treatment of outstanding equity awards, (2) revisions to the requested representations and warranties, (3) the termination fee proposals at 5.0% of fully diluted equity, which the Company proposed to reduce to 2.5% given the outstanding Note amounts that would also be due, and (4) the addition of a reverse termination fee equating to forgiveness of the outstanding amounts under the Note in the event the merger agreement and merger were not approved by the Company’s stockholders. The Company also submitted a request for due diligence materials related to Parent, the KARL STORZ affiliate that was to be party to the merger agreement. The comments to the merger agreement draft were discussed with the Transaction Committee the week of May 13, 2024.

 

Also on May 9, 2024, the Transaction Committee held a meeting to discuss the merger agreement and to receive an update on Plan B.

 

On May 14, 2024, the Company held its quarterly earnings call and filed its Quarterly Report on Form 10-Q for the quarter ended March 31, 2024.

 

On May 17, 2024, Ballard Spahr provided a revised draft of the merger agreement to Ropes & Gary with the revisions described above and the due diligence request list related to Parent.

 

On May 24, 2024, a meeting of the Asensus Board was held to continue the discussion of the LUNA financial model.

 

On May 28, 2024, Ropes & Gray provided a revised draft of the merger agreement to Ballard Spahr. The revised draft rejected the Company’s comments related to the treatment of outstanding equity awards and the proposal for payment of a reverse termination fee. The termination fee proposal was reduced to 4.0% of fully diluted equity value.

 

On May 29, 2024, the first draft of the Company’s disclosure letter to the merger agreement was delivered to Ropes & Gray. The Company continued to update the Company’s disclosure letter from May 30 to June 6, 2024, and the Company continued to provide requested due diligence materials.

 

On May 30, 2024, a Transaction Committee meeting was held to provide the Transaction Committee with updated information regarding the merger agreement negotiations and to seek input from the Committee. The Committee also discussed the status of Plan B.

 

The Company leadership spoke with the Company’s advisors over the next few days regarding the merger agreement and its provisions. Ballard Spahr provided a revised draft of the merger agreement to Ropes & Gray on May 30, 2024, restoring the reverse termination fee proposal, renewing its proposal for a reduced termination fee given the amounts that would be due under the Note, and requesting an “all hands” call to discuss the treatment of outstanding equity awards as well as the reverse termination fee. A call regarding the treatment of equity awards under the merger agreement occurred on May 31, 2024 and was attended by senior leadership of KARL STORZ, Mr. Fernando and representatives Ropes & Gray and Ballard Spahr. Representatives of UBS and Jefferies also were in attendance.

 

 

On June 4, 2024, Ballard Spahr provided two revised merger agreement drafts, proposing a termination fee of 3.5%, a compromise position in response to KARL STORZ’s most recent proposal of 4%, and including the removal of the reverse termination fee. On June 4, 2024, representatives of Ropes & Gray discussed all remaining open issues in the merger agreement with representatives of Ballard Spahr, including that the acceleration of equity awards would be limited to acceleration of vesting of performance-based restricted stock units granted in 2022 and 2023 (for which the achievement of the performance goals had been previously determined); all other equity awards would be converted into the right to receive cash compensation at the merger consideration level and paid out over time upon vesting, with the applicable terms and conditions set forth in the Incentive Plan continuing to apply to those awards.

 

Also on June 4, 2024, an Asensus Board meeting was held, attended by all Board members, management and representatives of Jefferies and Ballard Spahr. Jefferies reviewed its preliminary financial analysis of the merger consideration with the Asensus Board. The Asensus Board discussed the financial model, cash on hand, and capital requirements needed to continue the Company’s operations on a stand-alone basis, and the difficulties of raising such capital. The Asensus Board received an update on the status of the merger agreement negotiations and discussed Plan B.

 

On June 5, 2024, Ropes & Gray delivered a revised merger agreement reflecting the negotiated positions described above. Ballard Spahr returned a draft of the merger agreement to Ropes & Gray on June 5, 2024, with the addition of the payment process for the outstanding equity awards that would be converted to cash consideration and paid over time after the Closing.

 

On June 5, 2024, the Transaction Committee unanimously approved the merger agreement by written consent and recommended that the Asensus Board approve and adopt the merger agreement.

 

On June 6, 2024, the Asensus Board held a meeting, attended by all Board members, management and representatives of Jefferies and Ballard Spahr. Ballard Spahr representatives reviewed the Board’s fiduciary duty obligations and reviewed the final proposed merger agreement terms, including a termination fee representing 3.5% of the fully diluted equity value and no reverse termination fee. Also at this meeting, Jefferies reviewed its financial analysis of the merger consideration with the Asensus Board and rendered an oral opinion, confirmed by delivery of a written opinion dated June 6, 2024, to the Asensus Board to the effect that, as of such date and based on and subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as set forth in such opinion, the merger consideration to be received by holders of our common stock (other than, as applicable, KARL STORZ, Parent, Merger Sub and their respective affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders. After discussion of various matters, including the factors described under the heading “—Reasons of Our Boards Recommendation in Favor of the Merger,” the disinterested members of the Asensus Board unanimously approved the merger agreement, the merger and the transactions contemplated by the merger agreement.

 

Later on June 6, 2024, the parties executed the merger agreement.

 

On June 7, 2024, Asensus issued a press release announcing the execution of the merger agreement with an affiliate of KARL STORZ and filed a related Form 8-K with the SEC.

 

Financial Projections

 

Asensus does not, as a matter of course, publicly disclose long-term consolidated forecasts as to future performance, earnings or other results given, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. However, in connection with the Asensus Board’s evaluation of the merger, Asensus’ management, at the request of the Asensus Board, provided the Asensus Board with certain non-public, unaudited prospective financial information for the fiscal year ending December 31, 2024 through the fiscal year ending December 31, 2035, or the “Projections,” reflecting the best then-available estimates and judgments of Asensus’ management of the future financial performance of Asensus for such periods. The Projections also were provided to Asensus' financial advisor, Jefferies, for its use and reliance in connection with its financial analyses and opinion described under the heading “—Opinion of Asensus Financial Advisor” and certain portions of the Projections were provided to KARL STORZ. The information and table set forth below is included solely to give the Company’s stockholders access to certain of the financial projections that were made available to the Asensus Board, KARL STORZ and Jefferies and is not included in this proxy statement in order to influence any stockholder’s decision to vote with respect to the adoption of the merger agreement or for any other purpose.

 

 

The Projections summarized in this document have been prepared by, and are the responsibility of, Asensus’ management. BDO USA, P.C. has not audited, reviewed, examined, compiled or applied agreed-upon procedures with respect to the accompanying Projections and, accordingly, BDO USA, P.C. does not express an opinion or any other form of assurance with respect thereto. The BDO USA, P.C. report incorporated by reference in this proxy statement relates to the Company’s previously issued historical financial statements. It does not extend to the Projections and should not be read to do so.

 

The Projections reflect estimates and assumptions made by Asensus’ management with respect to R&D development of the LUNA System and general business, economic, competitive, regulatory and other market and financial conditions and other future events, all of which are difficult to predict and many of which are beyond Asensus’ control. In particular, the Projections, while presented with numerical specificity, necessarily were based on numerous variables and assumptions that may prove to be not appropriate. Because the Projections cover multiple years, by their nature, they become necessarily less predictive with each successive year and are unlikely to anticipate each and every circumstance that could have an effect on the Company’s business and its results of operations. The Projections were developed solely using the information available to Asensus’ management at the time they were created and reflect assumptions as to certain business and product development, capital raising and commercialization decisions that are subject to change. Important factors that may affect actual results or that may result in the Projections not being achieved include, but are not limited to, the development and regulatory approval pathway for the LUNA System, the ability to successfully commercialize and generate revenue from the LUNA System and the ISU, the effect of regulatory actions, and other risk factors described in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2023, as amended, the quarterly report on Form 10-Q for the quarter ended March 31, 2024, subsequent quarterly reports on Form 10-Q and current reports on Form 8-K. The Projections also reflect assumptions as to certain business decisions that are subject to change. Modeling and forecasting the future in the medical device and robotics industries, in particular, is a speculative endeavor.

 

None of Asensus, KARL STORZ or any of their respective affiliates, advisors or other representatives makes any representation to any stockholder regarding the Projections or the ultimate performance of Asensus relative to the Projections. The inclusion of the Projections in this proxy statement does not constitute an admission or representation of Asensus that the Projections or the information contained therein is material. Except as required by applicable law, neither Asensus nor any of its affiliates intends to, and each of them disclaims any obligation to, update, correct or otherwise revise the Projections if any or all of them have changed or change or otherwise have become, are or become inappropriate (even in the short term). These considerations should be taken into account if evaluating the Projections, which were prepared as of an earlier date.

 

The Projections should be evaluated, if at all, in conjunction with the historical financial statements and other information regarding Asensus in its filings with the SEC. The Projections were developed by Asensus’ management on a standalone basis without giving effect to the merger and the other transactions contemplated by the merger agreement, and therefore the Projections do not give effect to the proposed merger or any changes to Asensus’ operations or strategy that may be implemented after the consummation of the merger, including any costs incurred in connection with the proposed merger. Furthermore, the Projections do not take into account the effect of any failure of the proposed merger to be completed and should not be viewed as accurate or continuing in that context.

 

The Projections further reflect subjective judgment in many respects and, therefore, are susceptible to multiple interpretations and periodic revisions based on actual experience and business developments. The inclusion of the Projections should not be regarded as an indication that the Company or anyone who received the Projections then considered, or now considers, the Projections to be necessarily predictive of actual future events, and this information should not be relied upon as such. Asensus’ management views the Projections as being subject to inherent risks and uncertainties associated with such long-range projections.

 

Unlevered free cash flow, or unlevered FCF, contained in the Projections set forth below is a “non-GAAP financial measure,” which is a financial performance measure that is not calculated in accordance with GAAP. This non‑GAAP financial measure should not be viewed as a substitute for a GAAP financial measure and may be different from a non-GAAP financial measure used by other companies. Furthermore, there are limitations inherent in non-GAAP financial measures because they exclude charges and credits that are required to be included in a GAAP presentation. Accordingly, this non-GAAP financial measure should be considered together with, and not as an alternative to, financial measures prepared in accordance with GAAP.

 

 

The following table summarizes certain unaudited prospective financial information contained in the Projections:

 

     

For year ended December 31,

 
 

($ in millions)

 

2024E

       

2025E

   

2026E

   

2027E

   

2028E

   

2029E

   

2030E

   

2031E

   

2032E

   

2033E

   

2034E

   

2035E

 
 

Total Revenue

 

  $ 9.0         $ 9.0     $ 22.8     $ 104.3     $ 223.4     $ 361.6     $ 521.9     $ 603.9     $ 620.4     $ 607.2     $ 560.5     $ 497.4  
 

Operating Income (Loss) (1)

  $ (65.1 )       $ (73.2 )   $ (77.3 )   $ (36.2 )   $ 34.3     $ 121.1     $ 232.8     $ 303.5     $ 324.2     $ 322.3     $ 292.7     $ 249.8  
 

Unlevered FCF (2)

  $ (34.9 ) (3 )   $ (76.2 )   $ (83.6 )   $ (61.8 )   $ (9.9 )   $ 50.4     $ 128.6     $ 205.8     $ 241.3     $ 248.7     $ 236.3     $ 208.6  

 

 

(1) Operating income (loss) calculated as total revenue minus total operating expenses and includes the impact of stock-based compensation.

 

(2) Unlevered FCF calculated as operating income less income taxes, less changes in net working capital, less capital expenditures, plus depreciation and amortization. Unlevered free cash flow reflects a long-term tax rate of 24% and does not reflect any offset to Asensus’ taxes from the utilization of Asensus’ net operating losses, estimated by Asensus management to be approximately $193.7 million as of December 31, 2023, which estimated amount Jefferies was directed to utilize for purposes of its discounted cash flow analysis described under the section “—Opinion of Asensus Financial Advisor.”

 

(3) Represents estimated unlevered FCF for the last two quarters of the year ending December 31, 2024.

 

In the context of the above Projections, Asensus management assumed that Asensus would need to consummate several equity financings to support the capital needs of its business as a going concern in the amount of $13 million in the second quarter of 2024 and $100 million in each of the fiscal years 2025, 2026 and 2027.

 

Reasons for Our Boards Recommendation in Favor of the Merger

 

The disinterested members of the Asensus Board unanimously determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement are advisable, fair to and in the best interests of Asensus and its stockholders, and unanimously approved the merger agreement and the merger. Accordingly, disinterested members of the Asensus Board unanimously recommends that the stockholders of Asensus vote “FOR” the merger proposal.

 

In evaluating the merger agreement and the transactions contemplated by the merger agreement, including the merger, our Board consulted with the Company’s management and legal and financial advisors and, in recommending that our stockholders vote in favor of the merger proposal, our Board considered a number of factors weighing in favor of the merger, including the following, each of which our Board believed supported its decision:

 

 

Attractive Value. Our Board believes that the $0.35 per share price to be paid by Parent would provide stockholders with attractive value for their shares of Asensus common stock. The Asensus Board considered the relationship of the merger consideration to the historical trading ranges of our common stock and the potential trading ranges for our common stock in the future and the likelihood that it could take a considerable period of time before our common stock would trade at a price in excess of the merger consideration, if it ever would, as well as the fact that that the merger consideration constitutes:

 

 

o

a premium of approximately 52% over the closing price of our common stock on June 6, 2024, the last trading day prior to the announcement; and

 

 

 

o

a premium of approximately 67% based on the per share closing price of our common stock on the NYSE American on April 2, 2024, the date prior to the first announcement of a potential transaction with KARL STORZ.

 

 

Best Price Reasonably Attainable. Our Board believed that the merger consideration was the best price reasonably attainable for our stockholders after considering:

 

 

o

the absence of any bona fide expression of interest in acquiring Asensus on terms competitive with the proposal made by Parent, despite publicity regarding a potential sale of Asensus and the extensive effort by Asensus’ executive leadership team over the past three years to identify potential partners, investors or acquirors (see “The Merger  Background of the Merger” beginning on page 24);

 

 

o

the Company’s inability to secure needed capital to maintain the Company’s business and operations, and the estimated expense of implementing the Company’s strategic plan and operational goals;

 

 

o

the fact that the Company accepted bridge funding from KARL STORZ in order to pursue this transaction; and

 

 

o

our Board’s belief that the $0.35 per share price to be paid by Parent is the highest price per share that Parent was willing to pay and that the terms and conditions of the merger agreement were, in our Board’s view, the most favorable to us and our stockholders to which Parent was willing to agree.

 

 

Best Alternative for Maximizing Stockholder Value. After a review of our current and historical financial condition, results of operations, prospects, business strategy, management team, competitive position, and our industry and the industries in which our customers and vendors operate, our Board believes that the value offered to our stockholders under the merger agreement is more favorable to our stockholders than the potential value that might have resulted from the possible alternatives to the merger, including continuing as an independent public company. The Asensus Board believes that the Company would be unable to continue as an independent public company and the Company would be forced to seek bankruptcy protection in the event of a failed merger transaction.

 

 

Difficulty in Raising Capital. During 2022 and 2023, the Company’s ability to raise the capital necessary to advance its operations and strategic plan became increasingly difficult as its stock price declined and market conditions changed. The Asensus Board was concerned that it would be unable to raise sufficient capital to fund its operations to the extent needed to complete the LUNA System development efforts and other operations as shown in the Projections, and that, even if it were able to do so, the dilution to existing stockholders would be significant. See “The Merger  Financial Projections” on page 33. Therefore, the Asensus Board focused on potential acquisition opportunities, which led to the proposed transaction with KARL STORZ.

 

 

Lack of Other Viable Alternatives. That our executive team has aggressively pursued other possible acquisition, partnering or collaboration arrangements capable of providing the needed capital to grow the Company’s business, none of which yielded any indication of interest in a potential transaction with the Company.

 

 

Opinion of Jefferies. The Asensus Board considered the opinion, dated June 6, 2024, of Jefferies to the Asensus Board as to the fairness, from a financial point of view and as of such date, of the merger consideration to be received by holders of our common stock (other than, as applicable, KARL STORZ, Parent, Merger Sub and their respective affiliates) pursuant to the merger agreement, which opinion was based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as further described under the heading “The Merger  Opinion of Asensus Financial Advisor” on page 39, and the full text of which is attached hereto as Appendix B.

 

 

 

Certainty of Value. Our Board considered that the merger consideration was payable in cash and the obligations of Parent and Merger Sub under the merger agreement are not subject to any financing contingency, which provides certainty of value and liquidity to our stockholders.

 

 

High Probability of Completion. Our Board believes that there was a high likelihood that the merger would be completed based on, among other things:

 

 

o

the lack of antitrust or other regulatory impediments to closing;

 

 

o

the agreement of Parent to use reasonable best efforts to take all actions necessary, proper or advisable to consummate the merger as promptly as reasonably practicable, subject to certain exceptions;

 

 

o

our Board’s belief that the October 30, 2024, outside date of the merger agreement would allow for sufficient time to complete the merger;

 

 

o

the fact that the conditions to the closing of the merger are specific and limited in scope and that the definition of “material adverse effect” in the merger agreement contains certain carve-outs that make it less likely that adverse changes in our business between announcement and closing of the merger will provide a basis for Parent to refuse to consummate the merger; and

 

 

o

the representation of Parent that it has access to sufficient funds necessary for the payment of the aggregate merger consideration.

 

 

Opportunity to Receive Alternative Proposals and to Terminate the Merger Agreement in Order to Accept a Superior Proposal. Our Board considered the terms of the merger agreement permitting Asensus to respond to Company Acquisition Proposals, and believes that the terms of the merger agreement would not preclude or unreasonably restrict a superior offer from another party, considering:

 

 

o

our right under the merger agreement to respond to third parties submitting unsolicited Company Acquisition Proposals by providing non-public information subject to an acceptable confidentiality agreement, and to engage in discussions or negotiations with any such person, if our Board, prior to taking any such actions, determines in good faith that (i) after consultation with its financial advisor and outside legal counsel, the Company Acquisition Proposal either constitutes a superior proposal or is reasonably likely to result in a superior proposal and (ii) after consultation with its outside legal counsel, the failure to take such action would be inconsistent with our Board’s fiduciary duties under applicable law;

 

 

o

our ability to terminate the merger agreement to enter into an alternative acquisition agreement that our Board determines to be a superior proposal, subject to certain conditions, including Parent’s matching right and payment of a termination fee to Parent; and

 

 

o

our determination that the termination fee of $3,600,000 was reasonable in light of, among other things, the benefits of the merger to our stockholders, the typical size of such fees in similar transactions and the likelihood that a fee of such size would not be preclusive or unreasonably restrictive of other offers, even with the Company’s obligations to repay to KARL STORZ the amounts due under the Note.

 

 

Stockholder Approval and Appraisal Rights. Our Board also considered the fact that the merger is subject to approval by our stockholders, and our Board has the right, under certain circumstances, to withhold, withdraw, rescind or adversely modify its recommendation that our stockholders approve the merger agreement. Further, the Asensus Board considered that stockholders may exercise dissenters’ rights in connection with the merger and, if they comply with specified appraisal procedures under Delaware law, obtain fair value for their shares.

 

 

Our Board also considered the challenges and risks that we have faced, and would likely continue to face, if we remained an independent company, including:

 

 

our ability to execute on our strategic plan, and the risks, challenges, expense and uncertainties that would be associated with any such efforts, including our ability to continue to develop the LUNA System;

 

 

the challenges we have historically experienced in growing our business due to the extensive competition in the robotics industry;

 

 

our recent inability to maintain the price of our common stock, leading to difficulty in securing the capital needed to continue our business operations;

 

 

the challenges we have faced as a smaller company in competing against our competitors;

 

 

our need to expand our management team to develop and execute on a strategic plan that would address our future challenges and risks;

 

 

the capital necessary to implement our strategic plan and the long development and regulatory approval pathway and market penetration challenges facing the Company;

 

 

the additional and significant costs and burdens involved with being a public company;

 

 

the volatility in our financial performance and stock price resulting from various factors, including the factors described above; and

 

 

the other risks and uncertainties inherent in business as described in the section entitled “Risk Factors” set forth in our most recent Form 10-K and Form 10-Q.

 

In recommending that our stockholders vote in favor of the merger proposal, our Board also considered the risks and potentially negative factors relating to the merger agreement and the merger, including the following:

 

 

the fact that the merger would preclude our stockholders from the ongoing equity participation in Asensus and that our stockholders will therefore not participate in Asensus’ future earnings or growth, if any, or benefit from the appreciation, if any, in the value of our common stock;

 

 

the fact that any capital gains resulting from the receipt of the all-cash merger consideration would generally be taxable to those of our stockholders that are treated as U.S. holders for U.S. federal income tax purposes;

 

 

the fact that, under specified circumstances, we may be required to pay a termination fee and repay indebtedness in the event the merger agreement is terminated and the effect this could have on us, including:

 

 

o

the possibility that the $3,600,000 termination fee payable by us to Parent upon the termination of the merger agreement under certain circumstances could discourage other potential acquirors from making a competing proposal, although our Board believed that the termination fee was reasonable in amount and would not unduly deter any other party that might be interested in acquiring us; and

 

 

 

o

if the merger is not consummated, we will generally be required to pay our own expenses associated with the merger agreement and the transactions contemplated thereby, and would be required to repay the Note to KARL STORZ;

 

 

the restrictions in the merger agreement on our ability to actively solicit competing bids to acquire Asensus;

 

 

the significant costs involved in connection with entering into and completing the merger and the substantial time and effort of management required to consummate the merger, which could disrupt our business operations;

 

 

the potential harm that the announcement and pendency of the merger, or the failure to complete the merger, may cause to our relationships with our customer, vendors, and employees, including making it more difficult to attract and retain personnel and the possible loss of personnel;

 

 

the restrictions on our conduct of business prior to completion of the merger, which could delay or prevent us from taking certain actions with respect to our operations during the pendency of the merger, whether or not the merger is completed;

 

 

the fact that, although we expect the merger to be consummated if the merger proposal is approved by our stockholders, there can be no assurance that all conditions to the parties’ obligations to consummate the merger will be satisfied; and

 

 

the fact that certain of our directors and executive officers have interests in the merger that may be deemed to be different from, or in addition to, those of our stockholders.

 

After taking into account all of the factors set forth above, as well as others, our Board concluded that the potential benefits of the merger to our stockholders outweighed the potentially negative factors associated with the merger.

 

The foregoing discussion of the information and factors considered by our Board includes material factors but not all of the factors considered by our Board. In light of the complexity and variety of factors considered, our Board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. Moreover, individual directors may have given different weight to different factors. The disinterested members of our Board unanimously recommended that our stockholders vote in favor of the merger proposal based upon the totality of information it considered.

 

Opinion of Asensus Financial Advisor

 

Asensus has retained Jefferies as financial advisor to Asensus in connection with the merger. In connection with this engagement, the Asensus Board requested that Jefferies evaluate the fairness, from a financial point of view, of the merger consideration to be received by holders of our common stock (other than, as applicable, KARL STORZ, Parent, Merger Sub and their respective affiliates) pursuant to the merger agreement. At a meeting of the Asensus Board held on June 6, 2024 to evaluate the merger, Jefferies rendered an oral opinion, confirmed by delivery of a written opinion dated June 6, 2024, to the Asensus Board to the effect that, as of such date and based on and subject to the various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as set forth in such opinion, the merger consideration to be received by holders of our common stock (other than, as applicable, KARL STORZ, Parent, Merger Sub and their respective affiliates) pursuant to the merger agreement was fair, from a financial point of view, to such holders.

 

The full text of Jefferies’ opinion, which describes the various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken by Jefferies, is attached as Appendix B to this proxy statement and is incorporated herein by reference. Jefferies opinion was provided for the use and benefit of the Asensus Board (in its capacity as such) in its evaluation of the merger consideration from a financial point of view and did not address any other aspect of the merger or any other matter. Jefferies opinion did not address the relative merits of the merger or other transactions contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available to Asensus, nor did it address the underlying business decision by Asensus to engage in the merger or other transactions contemplated thereby. Jefferies opinion did not constitute a recommendation to the Asensus Board, and does not constitute a recommendation to any securityholder, as to how to vote or act with respect to the merger or any other matter. The following summary is qualified in its entirety by reference to the full text of Jefferies’ opinion.

 

 

In arriving at its opinion, Jefferies, among other things:

 

 

reviewed a draft, dated June 6, 2024, of the merger agreement;

 

 

reviewed certain publicly available financial and other information relating to Asensus;

 

 

reviewed certain information furnished to Jefferies by the management of Asensus relating to the business, operations and prospects of Asensus, including certain financial forecasts and estimates provided to or discussed with Jefferies by the management of Asensus assuming that Asensus continues as a going concern and after giving effect to assumed equity financings;

 

 

held discussions with members of the senior management regarding the business, operations and prospects of Asensus and the other matters described in the second and third bullet points above, including the liquidity needs of and capital resources available to Asensus and going-concern uncertainties;

 

 

reviewed the historical trading prices for our common stock; and

 

 

conducted such other financial studies, analyses and investigations as Jefferies deemed appropriate.

 

In its review and analysis and in rendering its opinion, Jefferies assumed and relied upon, but did not assume any responsibility to independently investigate or verify, the accuracy and completeness of all financial and other information that was supplied or otherwise made available by Asensus or that was publicly available to Jefferies (including, without limitation, the information described above) or otherwise reviewed by Jefferies. Jefferies relied on assurances of the management and other representatives of Asensus that they were not aware of any facts or circumstances that would make such information incomplete, inaccurate or misleading. In its review, Jefferies did not make or obtain an independent evaluation or appraisal of any of the assets or liabilities (contingent, accrued, derivative, off-balance sheet or otherwise), nor did Jefferies conduct a physical inspection of any of the properties or facilities, of Asensus or any other entity and Jefferies was not furnished with, and assumed no responsibility to obtain or conduct, any such evaluations, appraisals or physical inspections. Jefferies also did not evaluate the solvency or fair value of Asensus or any other entity under any state or federal laws relating to bankruptcy, insolvency or similar matters. In addition, Jefferies’ analyses and opinion did not consider any actual or potential arbitration, litigation, claims or possible unasserted claims, audits, investigations or other proceedings involving or affecting Asensus or any other entity.

 

With respect to the financial forecasts and estimates provided to and reviewed by Jefferies, Jefferies noted that projecting future results of any company is inherently subject to uncertainty. However, Jefferies was advised, and Jefferies assumed, that the financial forecasts and estimates relating to Asensus, after giving effect to assumed equity financings reflected therein, that Jefferies was directed to utilize for purposes of its analyses and opinion were reasonably prepared on bases reflecting the best currently available estimates and good faith judgments of the management of Asensus as to, and were an appropriate basis upon which to evaluate, the future financial performance of Asensus (assuming Asensus continues to operate as a going concern) and the other matters covered thereby. Jefferies expressed no opinion as to any financial forecasts or estimates or the assumptions on which they were based.

 

 

Jefferies relied upon the assessments of the management of Asensus as to, among other things, (i) the potential impact on Asensus of market, competitive, macroeconomic, geopolitical and other conditions, trends and developments in and prospects for, and governmental, regulatory and legislative matters relating to or otherwise affecting, the healthcare industry, including the medical device and manufacturing sector thereof, or the operations of Asensus, (ii) the capital funding requirements for Asensus’ operations, the ability of Asensus to access necessary debt or equity financing or effect alternative transactions for such funding requirements and the likely impact of any such financing or alternative transactions on Asensus, (iii) the transactions involving Asensus and SOFAR, S.p.A. and the bridge loan from KARL STORZ, including expected financial payments and other obligations and aspects; (iv) the products, product candidates and services of, and technology, patents and other intellectual property utilized in, Asensus’ business (including, without limitation, with respect to the development, manufacturing, commercialization and licensing of such products and product candidates and associated risks), and (v) existing and future agreements and other arrangements involving, and ability to attract, retain and/or replace, key employees, customers, suppliers, licensees, distributors and other commercial relationships of Asensus. As the Asensus Board was aware, Asensus’ Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and the consolidated financial statements for such fiscal year included therein indicated that Asensus’ anticipated capital needs in conjunction with past recurring losses, lack of positive cash flow and an accumulated deficit raised substantial doubt regarding Asensus’ ability to continue as a going concern in the near term and that Asensus would need to obtain additional financing to proceed with its business plan. Jefferies assumed that there would not be any developments with respect to any such matters that would be meaningful in any respect to Jefferies’ analyses or opinion.

 

Jefferies’ opinion was based on economic, monetary, regulatory, market and other conditions existing, and which could be evaluated, as of the date of Jefferies’ opinion. Jefferies expressly disclaimed any undertaking or obligation to advise any person of any change in any fact or matter affecting its opinion of which Jefferies becomes aware after the date of its opinion. As the Asensus Board was aware, the credit, financial and stock markets, the industry and sector in which Asensus operates and the securities of Asensus have experienced and may continue to experience volatility and disruptions and Jefferies expressed no view or opinion as to any potential effects of such volatility or disruptions on Asensus or the merger.

 

Jefferies made no independent investigation of, and Jefferies expressed no view or opinion as to, any legal, regulatory, accounting or tax matters affecting or relating to Asensus or the merger and Jefferies assumed the correctness in all respects meaningful to its analyses and opinion of all legal, regulatory, accounting and tax advice given to Asensus and/or the Asensus Board, including, without limitation, with respect to changes in, or the impact of, accounting standards or tax and other laws, regulations and governmental and legislative policies affecting Asensus or the merger and legal, regulatory, accounting and tax consequences to Asensus or its securityholders of the terms of, and transactions contemplated by, the merger agreement. Jefferies also assumed that the merger would be consummated in accordance with its terms without waiver, modification or amendment of any material term, condition or agreement and in compliance with all applicable laws, documents and other requirements and that, in the course of obtaining the necessary governmental, regulatory or third-party approvals, consents, waivers and releases for the merger or otherwise, including with respect to any divestitures or other requirements, no delay, limitation, restriction or condition would be imposed or occur that would have an adverse effect on Asensus or the merger or that otherwise would be meaningful in any respect to Jefferies’ analyses or opinion. Jefferies further assumed that the final merger agreement, when signed by the parties thereto, would not differ from the draft reviewed by Jefferies in any respect meaningful to Jefferies’ analyses or opinion.

 

As the Asensus Board was aware, in connection with Jefferies’ engagement, Jefferies was not requested to, and it did not, solicit indications of interest or proposals from third parties regarding the possible acquisition of all or a part of Asensus or any alternative transaction. Jefferies’ opinion did not address the relative merits of the merger or other transactions contemplated by the merger agreement as compared to any alternative transaction or opportunity that might be available to Asensus, nor did it address the underlying business decision by Asensus to engage in the merger or other transactions contemplated thereby or the terms of the merger agreement, including the form or structure of the merger or any term, aspect or implication of any agreements, arrangements or understandings entered into in connection with, or contemplated by or resulting from, the merger or otherwise. Jefferies’ opinion was limited to the fairness, from a financial point of view and as of the date of such opinion, of the merger consideration to be received by holders of our common stock (to the extent expressly specified in such opinion), without regard to individual circumstances of specific holders (whether by virtue of control, voting or consent, liquidity, contractual arrangements or otherwise) that may distinguish such holders or the securities of Asensus held by such holders, and Jefferies’ opinion did not in any way address proportionate allocation or relative fairness among such holders, holders of any other securities of Asensus or otherwise. Jefferies was not asked to, and its opinion did not, address the fairness, financial or otherwise, of any consideration to the holders of any class of securities, creditors or other constituencies of Asensus or any other party. Furthermore, Jefferies did not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation or other consideration payable to or to be received by any officers, directors or employees, or any class of such persons, in connection with the merger relative to the merger consideration or otherwise. Jefferies also expressed no view or opinion as to the prices at which shares of our common stock or any other securities of Asensus may trade or otherwise be transferable at any time, including following announcement or consummation of the merger. The issuance of Jefferies’ opinion was authorized by the Fairness Committee of Jefferies LLC.

 

 

In connection with rendering its opinion to the Asensus Board, Jefferies performed certain financial and comparative analyses, including those described below. The following summary is not a complete description of the analysis performed and factors considered by Jefferies in connection with its opinion. The preparation of a financial opinion is a complex process involving subjective judgments and is not necessarily susceptible to partial analysis or summary description. The analysis performed necessarily involved complex considerations and judgments concerning financial and operating characteristics and other factors that could affect public trading, acquisition or other values.

 

Jefferies believes that its analysis and the summary below must be considered as a whole and in context and that selecting portions of its analysis and factors or focusing on information presented in tabular format, without considering all aspects of such analysis and factors or the narrative description of the analysis, could create a misleading or incomplete view of the processes underlying Jefferies’ analysis and opinion. Jefferies did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion, but rather arrived at its ultimate opinion based on the results of the analysis and factors assessed as a whole.

 

The estimates of the future performance of Asensus in or underlying Jefferies’ analysis are not necessarily indicative of future results or values, which may be significantly more or less favorable than those estimates. In performing its analysis, Jefferies considered industry performance, general business and economic conditions and other matters, many of which were beyond the control of Asensus. Estimates of the financial value of companies do not purport to be appraisals or necessarily reflect the prices at which companies or securities actually may be sold or acquired. Accordingly, the estimates used in, and the implied reference range resulting from, Jefferies’ analysis described below are inherently subject to substantial uncertainty and should not be taken as Jefferies’ view of the actual value of Asensus or its business or securities.

 

The merger consideration payable pursuant to the merger agreement was determined through negotiations between Asensus and KARL STORZ, and the decision by Asensus to enter into the merger agreement was solely that of the Asensus Board. Jefferies’ opinion and financial analysis were only one of many factors considered by the Asensus Board in its evaluation of the merger consideration and should not be viewed as determinative of the views of the Asensus Board or Asensus’ management with respect to the merger or the consideration payable in the merger.

 

The summary of the financial analysis described below under the heading “—Financial Analysis” is a summary of the material financial analysis reviewed with the Asensus Board and performed by Jefferies in connection with its opinion. The financial analysis summarized below includes information presented in tabular format. In order to fully understand Jefferies financial analysis, the table below must be read together with the text of the related summary. The table alone does not constitute a complete description of the financial analysis. Considering the data below without considering the full narrative description of the financial analysis, including the methodologies and assumptions underlying the analysis, could create a misleading or incomplete view of Jefferies financial analysis.

 

Financial Analysis

 

Discounted Cash Flow Analysis. Jefferies performed a discounted cash flow analysis of Asensus by calculating the estimated present value of the standalone unlevered, after-tax free cash flows that Asensus was forecasted to generate during the last two quarters of the fiscal year ending December 31, 2024 through the full fiscal year ending December 31, 2035 based on financial forecasts and estimates of the management of Asensus after giving effect to assumed equity financings for Asensus. For purposes of this analysis, Asensus’ federal net operating loss carryforwards (with respect to which an implied estimated net present value of $0.09 per share was derived calculated at an assumed estimated cost of equity for Asensus of 23.5%) were taken into account. Jefferies calculated terminal values for Asensus by applying to Asensus’ fiscal year 2035 unlevered, after tax free cash flow a selected range of perpetuity growth rates of (10.0%) to 0%. The present values (as of June 30, 2024) of the cash flows and terminal values were then calculated using a selected range of discount rates of 20.5% to 23.5%.

 

This analysis indicated the following approximate implied per share equity value reference range for Asensus, as compared to the merger consideration:

 

Implied Equity Value

Per Share Reference Range

   

Merger Consideration

 
$0.18 $0.48       $0.35  

 

Certain Additional Information

 

Jefferies also observed certain additional information that was not considered part of its financial analysis with respect to its opinion but was noted for informational purposes, including the following:

 

 

historical closing prices of our common stock during the 52-week period ended April 2, 2024 (the last trading day prior to public announcement of the execution of a non-binding letter of intent between Asensus and KARL STORZ regarding a proposed transaction between Asensus and KARL STORZ), which indicated low and high closing prices of our common stock of approximately $0.20 per share and $0.86 per share, respectively; and

 

 

a publicly available Wall Street research analyst price target for our common stock, which indicated a price target for our common stock of $0.35 per share (as of a report date of May 16, 2024, after public announcement of the execution of the non-binding letter of intent between Asensus and KARL STORZ) and $2.00 per share (as of a report date of March 22, 2024, prior to public announcement of the execution of the non-binding letter of intent between Asensus and KARL STORZ).

 

Miscellaneous

 

Asensus has agreed to pay Jefferies for its financial advisory services in connection with the merger an aggregate fee currently estimated to be approximately $4.5 million, of which $1.125 million was payable upon delivery of Jefferies’ opinion to the Asensus Board and the balance is payable contingent upon consummation of the merger. In addition, Asensus agreed to reimburse Jefferies for its expenses, including fees and expenses of counsel, incurred in connection with Jefferies’ engagement and to indemnify Jefferies and related parties against certain liabilities, including liabilities under federal securities laws, arising out of or in connection with the services rendered and to be rendered by Jefferies under its engagement.

 

Although Jefferies and its affiliates had not provided financial advisory or financing services to Asensus unrelated to the merger or to KARL STORZ during the two-year period prior to the date of Jefferies’ opinion for which Jefferies and its affiliates received compensation, Jefferies and its affiliates in the future may provide such services to Asensus, KARL STORZ and/or their respective affiliates for which services Jefferies and/or its affiliates would expect to receive compensation. In the ordinary course of business, Jefferies and its affiliates may trade or hold securities or financial instruments (including loans and other obligations) of Asensus, KARL STORZ and/or their respective affiliates for Jefferies’ own account and for the accounts of Jefferies’ customers and, accordingly, may at any time hold long or short positions or otherwise effect transactions in those securities or financial instruments.

 

Jefferies was selected as a financial advisor to Asensus in connection with the merger because, among other things, Jefferies is an internationally recognized investment banking firm with substantial experience in merger and acquisition transactions and based on its familiarity with the industry in which Asensus operates. Jefferies is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities and private placements.

 

 

Legal Proceedings

 

As of the filing of this proxy statement, there were no legal proceedings pending related to the merger

 

Interests of Our Directors and Executive Officers in the Merger

 

In considering the recommendation of the Asensus Board that Asensus stockholders vote to approve and adopt the merger agreement, our stockholders should be aware that certain of our non-employee directors and executive officers have interests in the merger that are different from, or in addition to, those of Asensus stockholders generally. The Asensus Board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement, approving the merger agreement and the merger, and recommending that the merger agreement be approved and adopted by our stockholders.

 

Insurance and Indemnification of Directors and Executive Officers

 

Under the merger agreement, any rights to indemnification or exculpation now existing in favor of the directors or officers of Asensus and its subsidiaries (the “Indemnified Parties” and, each, an “Indemnified Party”) as provided in their respective organizational documents or indemnification agreements, in effect as of the date of the merger agreement, with respect to matters occurring at or prior to the effective time of the merger, will (i) survive the merger, (ii) continue in full force and effect for a period of six (6) years after the effective time of the merger, and (iii) not be amended, repealed or otherwise modified in any manner that would materially and adversely affect the rights thereunder of individuals who at any time on or prior to the effective time of the merger were directors or officers of Asensus and its subsidiaries with respect to actions or omissions occurring at or prior to the effective time, unless such modification is required by law. If any claim is asserted or made either prior to the effective time of the merger or within such six (6) year period, all rights to indemnification with respect to any such claim or claims will continue until disposition of all such claims.

 

Additionally, for a period of six (6) years from the effective time of the merger, all rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the merger (whether asserted or claimed prior to, at or after the effective time of the merger) now existing in favor of the current or former directors or officers of Asensus or any of its subsidiaries and any indemnification or other similar agreements of Asensus, in each case as in effect on the date of the merger agreement, shall continue in full force and effect in accordance with their terms and Parent will cause Asensus and its subsidiaries to perform their obligations thereunder.

 

Without limiting the foregoing, from the effective time until the sixth anniversary of the effective time, Parent and the surviving corporation (together with its successors and assigns, the “Indemnifying Parties) will, to the fullest extent permitted under applicable law, indemnify and hold harmless each Indemnified Party in his or her capacity as an officer or director against all losses, claims, damages, liabilities, fees, expenses, judgments or fines incurred by such Indemnified Party in connection with any legal proceeding based on or arising out of the fact that such Indemnified Party is or was a director or officer of Asensus and its subsidiaries at or prior to the effective time of the merger and pertaining to any and all matters pending, existing or occurring at or prior to the effective time of the merger, whether asserted or claimed prior to, at or after the effective time of the merger, including any such matter arising under any claim with respect to the transactions contemplated by the merger agreement. In addition, from the effective time of the merger until the sixth anniversary of the effective time, the Indemnifying Parties will, to the fullest extent permitted under applicable law, advance reasonable and documented out-of-pocket costs and expenses (including reasonable and documented attorneys’ fees) incurred by the Indemnified Parties in connection with matters for which the Indemnified Parties are eligible to be indemnified within fifteen (15) days after receipt by the surviving corporation of a written request for such advance, subject to the execution by such Indemnified Parties of appropriate undertakings in favor of the Indemnifying Parties to repay such advanced costs and expenses if it is ultimately determined in a final and non-appealable judgment of a court of competent jurisdiction that such Indemnified Party is not entitled to be indemnified under the Merger Agreement.

 

Asensus may (i) maintain, at no expense to the beneficiaries, in effect for six (6) years from the effective time, the current policies of the directors’ and officers’ liability insurance, employment practices liability insurance and fiduciary duty liability insurance maintained by Asensus (together, the “Current D&O Insurance”) with respect to matters existing or occurring at or prior to the Effective Time (including the transactions contemplated by the merger agreement), so long as the annual premium therefor, on an aggregate basis, would not be in excess of three hundred percent (300%) of the last annual premium for the Current D&O Insurance, on an aggregate basis, paid prior to the effective time of the merger (such three hundred percent (300%), the “Maximum Premium”), or (ii) on terms with respect to coverage, deductibles and amounts no less favorable than the existing policy, purchase (through a nationally recognized insurance broker) a six (6) year “tail policy” for the existing policy effective as of the effective time, for a premium not in excess of the Maximum Premium, with respect to the Current D&O Insurance and maintain such endorsement in full force and effect for its full term. However, if Asensus’ or the surviving corporation’s existing insurance expires, is terminated or cancelled during such six (6) year period or exceeds the Maximum Premium, the surviving corporation will obtain and Parent will cause the Surviving Corporation to obtain, as much directors’ and officers’ liability insurance as can be obtained for the remainder of such period for an annualized premium not in excess of the Maximum Premium.

 

 

Employee Benefits

 

For more information, please see the section of this proxy statement captioned “The Merger Agreement-Employee Matters.”

 

Treatment and Quantification of Common Stock and Company Equity Awards

 

Each of the executive officers of the Company, Anthony Fernando, our President and Chief Executive Officer, and Shameze Rampertab, our Executive Vice President and Chief Financial Officer, hold a significant number of outstanding equity awards. With respect to the number of Company PRSUs for which performance goals have been determined, 412,300 Company PRSUs for Anthony Fernando and 179,084 Company PRSUs for Shameze Rampertab, they will receive $144,305 and $62,679, respectively in additional compensation for those awards for which vesting will be accelerated to the effective time. All other awards, however, will not be paid out in connection with the closing of the merger unless the Company terminates the executive officer’s employment without Cause or the executive officer terminates his employment agreement for Good Reason (each, as defined in the executive officer’s employment agreement) in connection with the closing of the merger, as described below.

 

The non-employee directors hold shares of common stock that will be entitled to receive the merger consideration. In addition, four of the six non-employee directors hold vested Company Options, however all such Company Options have an exercise price equal to or greater than $0.35 per share, so such Company Options will be cancelled at the effective time with no consideration due to the directors.

 

The following table sets forth the number of shares of common stock and the number of shares of common stock underlying equity awards held by each of the Company’s executive officers and non-employee directors that are outstanding as of June 21, 2024. The table also sets forth the values of these shares and equity awards, determined by multiplying the number of shares (or shares underlying Company Options, Company RSUs or Company PRSUs, as applicable) by the merger consideration (minus the applicable per share exercise price for any Company Options). The table does not include any Company Options that have an exercise price equal to or greater than the merger consideration.

 

Name of Executive

Officer or Director

 

Number

of Shares

of

Company Common

Stock

 

(#)

   

Cash Consideration for Shares of Company Common

Stock

 

($)

   

Number of Shares of Company Common

Stock Underlying Company Options

 

(#)

 

   

Cash Consideration for Company Options

 

($)

 

   

Number of Shares of Company Common

Stock Underlying Company RSUs

 

(#)

 

   

Cash Consideration for Company RSUs

 

($)

   

Number of Shares of Company Common

Stock Underlying Company PRSUs

 

(#)

 

   

Cash Consideration for Company PRSUs

 

($) (1)

 

Executive Officers

 

Anthony Fernando

    2,198,903       769,616       1,488,100       133,929.00       1,651,000       577,850       2,889,700       1,011,395  

Shameze Rampertab

    416,288       145,701       396,800       35,712.00       839,682       293,889       509.383       178,284  

Non-Employee Directors

 

David Milne (2)(3)

    619,884       216,959    

   

   

   

   

   

 

Andrea Biffi (2)(4)

    492,815       172,485    

   

   

   

   

   

 

Kevin Hobert (2)(5)

    36,134       12,647    

   

      18,067       6,323    

   

 

Elizabeth Kwo (2)(5)

    99,134       34,697    

   

      18,067       6,323    

   

 

Richard Pfenniger (2)

    189,417       66,296    

   

   

   

   

   

 

William Starling (2)

    13,846       4,846    

   

   

   

   

   

 

W. Starling and D. Starling, Trustees of the Starling Family Trust, UDT August 15, 1990

    39,134       13,697    

   

   

   

   

   

 

 

 


 

 

(1)

Mr. Fernando and Mr. Rampertab will receive $144,305 and $62,679, respectively, in respect of a portion of their Company PRSUs upon consummation of the merger under the terms of the merger agreement. Such portion is included in the above table. Payments in respect of the remaining Company PRSUs will only be made if the performance goals and vesting conditions associated with such Company PRSUs are met or if vesting is accelerated as a result of the executive officer being terminated without cause or terminating employment for good reason in connection with the merger. Payments in respect of the Company Options and Company RSUs will only be made if the relevant vesting conditions associated with the Company Options or Company RSUs, as applicable, are met or if vesting is accelerated as a result of the executive officer being terminated without cause or terminating employment for good reason in connection with the merger.

 

 

(2)

No non-employee director holds Company Options with an exercise price less than the merger consideration.

 

 

(3)

Mr. Milne also holds Series D warrants to purchase 147,058 shares of common stock with an exercise price higher than $0.35 per share.

 

 

(4)

Mr. Biffi is also a director and principal of Three Heads Investment S.r.l., an entity that holds 1,482,008 shares of common stock. Mr. Biffi disclaims beneficial ownership of the shares held by Three Heads Investments, except for his pecuniary interest therein.

 

 

(5)

These Company RSUs will vest on July 22, 2024.

 

Employment Agreements: Change in Control and Severance Arrangements

 

Anthony Fernando

 

On November 8, 2019, the Company entered into an amended and restated employment agreement with Anthony Fernando regarding Mr. Fernando’s employment with the Company as its President and Chief Executive Officer. The term of the employment agreement automatically renews for successive one-year terms, unless terminated in accordance with the terms of the employment agreement. Mr. Fernando’s annual base salary effective as of January 1, 2024, is $550,000. Mr. Fernando’s salary is subject to increase in accordance with the employment agreement. He is eligible to receive annually, or otherwise, an incentive compensation award opportunity, payable in cash, as determined by the Compensation Committee of the Asensus Board, and he is eligible for long term incentive equity compensation. Mr. Fernando’s target annual cash incentive compensation opportunity will not be less than 75% of his base salary for the portion of the employment period falling within a given fiscal year, and performance goals are based on Company performance metrics, as established and approved by the Compensation Committee or the Asensus Board annually. Subject to his execution of a release of claims in favor of the Company, Mr. Fernando is entitled to severance benefits, paid by the Company or any successor, as follows. If Mr. Fernando’s employment is terminated within one year following or within six months prior to and in connection with a Change in Control of the Company (as defined in the employment agreement), which would include the merger, either without Cause by the Company or by him for Good Reason, his severance payable is two times the sum of (a) his annual rate of base salary immediately preceding his termination of employment, and (b) his target annual bonus for the fiscal year in which the Change in Control occurs, or, if he is not employed by the Company in such year, or a bonus is not determined for such year, then the year immediately preceding the year in which the Change in Control occurs. In addition, Mr. Fernando would continue to receive payment for healthcare benefits for twenty-four months. Such severance benefit shall be paid in a lump sum within 60 days following the later of termination and the date of the Change in Control, subject to any payment delay required by applicable law. Further, in the event of termination of his employment in connection with a Change in Control, to the extent not previously accelerated, all of Mr. Fernando’s unvested outstanding equity awards shall accelerate and vest upon the date of termination. Mr. Fernando is subject to non-solicitation and non-competition covenants during the terms of the employment agreement and for one year immediately following the termination of his employment.

 

 

Mr. Fernando has not been offered an employment agreement with Parent or KARL STORZ as of the date of this proxy statement. Prior to and following the closing, however, Mr. Fernando may have discussions regarding employment with KARL STORZ or an affiliate.

 

Shameze Rampertab

 

On August 14, 2020, the Company entered into an employment agreement with Mr. Rampertab regarding Mr. Rampertab’s employment with the Company as Executive Vice President and Chief Financial Officer, which employment agreement was amended effective September 16, 2020. The term of the employment agreement automatically renews for successive one-year terms, unless terminated in accordance with the terms of the employment agreement. The terms of his employment and his employment agreement are subject to Ontario’s Employment Standards Act, 2000 (the “ESA”), the Ontario Human Rights Code and other statutory and common law requirements. These requirements with very limited exceptions include mandated minimum notice periods, or pay in lieu of notice, for termination of employment, which are generally one week for each year of service up to eight weeks, and may include statutory severance, generally one week of pay for each year of service up to 26 weeks.

 

Mr. Rampertab’s current base salary is $351,520 per year effective January 1, 2024. Mr. Rampertab is also eligible to receive annual short-term, performance-based cash bonus awards. During the term, Mr. Rampertab’s target annual cash incentive compensation opportunity will be no less than 50% of his base salary for the portion of the employment period falling within a given fiscal year, with performance goals based on Company performance metrics, as established by the Compensation Committee or the Asensus Board. Subject to his execution of a release of claims in favor of the Company, Mr. Rampertab is entitled to severance benefits under the employment agreement as follows: if Mr. Rampertab’s employment is terminated within one year following or within six months prior to and in connection with a Change in Control of the Company (as defined in the employment agreement), which includes the merger, either by the Company without Cause or by him for Good Reason, his severance benefits will equal an amount equal to the greater of (a) severance and continued health and welfare benefits for twelve (12) months following termination, or (b) any additional minimum pay in lieu of notice, statutory severance, benefits continuation, accrued vacation and any other minimum entitlement as required by the ESA, to the extent the ESA then governs any amounts payable to Mr. Rampertab. Such severance benefit shall be paid in a lump sum within 60 days following the later of termination and the date of the Change in Control, subject to any payment delay required by applicable law. In addition, Mr. Rampertab would continue to be eligible for healthcare benefits for the twelve months following termination. Further, in the event of termination of his employment in connection with a Change in Control, to the extent not previously accelerated, all of Mr. Rampertab’s unvested outstanding equity awards shall accelerate and vest upon the date of termination. Further, the vesting period of Mr. Rampertab’s equity awards may extend beyond the date of termination of his employment and continue to the end of the minimum notice of termination period required by the ESA in the event of a termination of his employment pursuant to which notice of termination (or pay in lieu thereof) is required by the ESA (if the ESA is applicable at the time of termination). The exercisability of the stock options will extend through the 90-day period following termination of his employment, unless there is a termination for Cause, in which case it will extend until the date of termination or the end of the statutory notice period required by the ESA if the circumstances of the termination require notice of termination pursuant to the ESA. Mr. Rampertab is subject to non-solicitation and non-competition covenants during the terms of the employment agreement and for one year immediately following the termination of his employment.

 

Mr. Rampertab has not been offered an employment agreement with Parent or KARL STORZ as of the date of this proxy statement. Prior to and following the closing, however, Mr. Rampertab may have discussions regarding employment with KARL STORZ or an affiliate.

 

 

Receipt of Contingent Consideration; Interested Director

 

On September 21, 2015, the Company completed the strategic acquisition, through its wholly owned subsidiary Asensus International, Inc. (formerly known as TransEnterix International, Inc.) from Sofar S.p.A., an Italian company (“Sofar”), of all of the assets, employees and contracts related to the advanced robotic system for minimally invasive laparoscopic surgery now known as the Company’s Senhance System. Under the terms of the Purchase Agreement, as amended in 2016, as of March 31, 2024, the Company has accrued $8.7 million of estimated fair value of remaining contingent consideration related to a milestone of €15.0 million which shall be payable upon achievement of trailing revenues from sales or services contracts of the Senhance System of at least €25.0 million over a calendar quarter or in the event that (i) the Company or Asensus International is acquired, (ii) the Company significantly reduces or suspends selling efforts of the Senhance System, or (iii) the Company acquires a business that offers alternative products that are directly competitive with the Senhance System. In 2022, Sofar assigned its right to receive the contingent payment to Three Heads Investment S.r.l. Andrea Biffi, a director of the Company, was chief executive officer of Sofar and is now a director and principal of Three Heads Investment. Following the consummation of the merger, if all closing conditions are met, the surviving corporation will pay the contingent consideration to Three Heads Investment.

 

Quantification of Payments and Benefits to Named Executive Officers

 

This section sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each named executive officer of the Company that is based on or otherwise relates to the merger. This compensation is referred to as “golden parachute” compensation by the applicable SEC disclosure rules, and in this section we use such term to describe the merger-related compensation payable to our named executive officers. The “golden parachute” compensation payable to these individuals is subject to a non-binding advisory vote of Asensus stockholders, as described in –“Non-Binding Advisory Vote on Merger Related Compensation to our Named Executive Officers”.

 

The estimated value of the payments and benefits that our named executive officers will or may be entitled to receive in connection with the merger is quantified below in accordance with Item 402(t) of Regulation S-K. These estimated amounts assume (i) that the merger is consummated and each such named executive officer experienced a termination by the Company without cause on July 31, 2024 (which is the assumed date solely for purposes of this golden parachute compensation disclosure); (ii) that each named executive officer’s base salary rate and annual target bonus opportunity remain unchanged from those in effect as of the date of this proxy statement; (iii) that each named executive officers’ Company PRSUs vest based on maximum performance; and (iv) that none of the named executive officers’ equity awards that are outstanding as of July 31, 2024, vest, are exercised or are forfeited, and none of the named executive officers are granted additional equity awards, in each case prior to the date of the consummation of the merger or the executive’s termination, as applicable. In addition, these amounts do not attempt to forecast any additional awards, grants, or forfeitures that may occur prior to the effective time or any awards that, by their terms, vest irrespective of the merger prior to July 31, 2024, and do not include any reduction on account of Section 280G or 4999 of the Code. Further, these amounts do not include any post-closing compensation arrangements that may be contemplated. As a result of the foregoing assumptions, which may or may not actually occur or be accurate on the relevant date, including the assumptions described in the footnotes to the table, the actual amounts, if any, to be received by a named executive officer may differ materially from the amounts set forth below.

 

For purposes of this discussion, “single-trigger” refers to benefits that arise as a result of the completion of the merger and “double -trigger” refers to benefits that require two conditions, which are the completion of the merger and a qualifying termination.

 

 

As noted above, neither Mr. Fernando nor Mr. Rampertab has been offered an employment agreement with Parent or KARL STORZ in connection with the merger agreement and the merger. Under each of their current employment agreements, if the Company terminates the employment of a named executive officer without “Cause” (as defined in the relevant employment agreement) or the named executive officer terminates his employment for “Good Reason” (as defined in the relevant employment agreement), the named executive officer would be entitled to the following severance benefits:

 

Named Executive Officer

 

Cash ($)

   

Equity ($)

 

Pension/NQDC

($)

 

Perquisites/

benefits

($)

 

Tax

Reimbursement ($)

Other ($)

 

Total ($)

 

Anthony Fernando

    1,925,000       1,578,850   83,821  

 

    3,587,671  
                                       

Shameze Rampertab

    526,875       445,206         23,312           995,393  

 

Notes:

 

(1)

No severance benefits become payable and no equity award acceleration occurs automatically on the event of a change of control, under the named executive officers’ employment agreements. Mr. Fernando and Mr. Rampertab will, however, receive $144,305 and $62,679, respectively, in respect of their Company PRSUs upon consummation of the merger under the terms of the merger agreement. The payments in respect of these PRSUs are “single trigger” payments.

 

(2)

Receipt of severance is contingent upon executing a release of claims. Severance is paid in a lump sum within 60 days following the later of termination and the date of the Change in Control. Severance payments are “double trigger” payments.

 

(3)

Consists of the difference between the merger consideration per share and the exercise price of the Company Options for each share of common stock underlying in-the-money Company Options and the merger consideration for each share of common stock underlying any Company RSUs and Company PRSUs (other than described above). These payments are “double trigger” payments.

 

(4)

For Mr. Rampertab, the amount in Perquisites/benefits consists of the approximate cost of continued healthcare benefits. Mr. Fernando does not receive healthcare benefits from the Company.

 

Certain Material U.S. Federal Income Tax Consequences

 

The following is a general discussion of certain material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of our common stock whose shares are exchanged for cash pursuant to the merger. This discussion does not address U.S. federal income tax consequences with respect to holders other than U.S. holders. This discussion is based on the provisions of the U.S. Internal Revenue Code of 1986, as amended, which we refer to as the “tax code,” applicable U.S. Treasury Regulations promulgated under the tax code, judicial opinions and administrative rulings and published positions of the Internal Revenue Service, which we refer to as the “IRS,” each as in effect as of the date hereof. These authorities are subject to change or differing interpretations, possibly on a retroactive basis, and any such change or interpretation could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion is general in nature and does not discuss all aspects of U.S. federal income taxation that may be relevant to a holder of shares of our common stock in light of such holder’s particular circumstances. This discussion does not address any tax considerations under state, local or non-U.S. laws or U.S. federal laws other than those pertaining to the U.S. federal income tax (such as estate, gift, Medicare contribution tax laws or other non-income tax consequences). This discussion is not binding on the IRS or the courts and, therefore, could be subject to challenge, which could be sustained. We have not sought, and no ruling will be sought from the IRS with respect to the merger. Accordingly, there can be no assurance that the IRS will not take a position contrary to such statements or that any such contrary position taken by the IRS would not be sustained by a court. U.S. holders are urged to consult with their own tax advisors to determine the specific consequences to them of the merger.

 

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of our common stock that is for U.S. federal income tax purposes:

 

 

an individual that is a citizen or resident of the United States;

 

 

a corporation, or other entity classified as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

 

 

 

a trust if (1) a court within the United States is able to exercise primary supervision over the trust’s administration, and one or more U.S. persons are authorized to control all substantial decisions of the trust or (2) such trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or

 

 

an estate the income of which is subject to U.S. federal income tax regardless of its source.

 

This discussion applies only to U.S. holders of shares of our common stock who hold such shares as a capital asset within the meaning of Section 1221 of the tax code (generally, property held for investment). Further, this discussion does not purport to consider all aspects of U.S. federal income taxation that may be relevant to a U.S. holder in light of its particular circumstances, or that may apply to U.S. holders subject to special treatment under U.S. federal income tax laws (including, for example, insurance companies, dealers or brokers in securities or non-U.S. currencies, traders in securities who elect the mark-to-market method of accounting, holders subject to the alternative minimum tax, U.S. holders that have a functional currency other than the U.S. dollar, tax-exempt organizations, tax-qualified retirement plans, banks and other financial institutions, mutual funds, certain former citizens or former long term residents of the United States, partnerships (or other entities or arrangements treated as partnerships for U.S. federal income tax purposes), S corporations, or other pass-through entities, or investors in such partnerships, S corporations or other pass-through entities, real estate investment trusts, regulated investment companies, persons subject to special rules under Section 892 of the Code, persons that have a principal place of business or “tax home” outside of the United States, U.S. holders who hold shares of our common stock as part of a hedge, straddle, constructive sale, conversion or other integrated transaction, a holder required to accelerate the recognition of any item of gross income with respect to our common stock as a result of such income being recognized on an applicable financial statement, U.S. holders who acquired their shares of our common stock through the exercise of employee stock options or otherwise as compensation, through a tax qualified retirement plan or other compensation arrangements, and dissenters (as defined under “Appraisal Rights” below)), entities subject to U.S. anti-inversion rules, holders who hold their common stock as “qualified small business stock” for purposes of Sections 1045 and 1202 of the Code, or certain former citizens or long-term residents of the Unites States.

 

If a partnership (including for this purpose any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of our common stock, the tax treatment of a partner in such partnership will generally depend on the status of the partners and the activities of the partnership. If you are, for U.S. federal income tax purposes, a partner in a partnership holding shares of our common stock, you should consult your tax advisor.

 

The U.S. federal income tax treatment of the transactions discussed herein to any particular Holder of our common stock will depend on the Holders particular tax circumstances. You should consult your tax advisor with respect to the specific tax consequences to you of the merger in light of your own particular circumstances, including U.S. federal, state, local and non-U.S. income and other tax consequences.

 

Tax Consequences of the Merger

 

The receipt of cash by U.S. holders in exchange for shares of our common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. In general, for U.S. federal income tax purposes, a U.S. holder who receives cash in exchange for shares of our common stock pursuant to the merger will recognize capital gain or loss in an amount equal to the difference, if any, between (1) the amount of cash received plus the amount used to satisfy any applicable withholding taxes and (2) the U.S. holder’s adjusted tax basis in such shares. A U.S. holder’s adjusted tax basis in its shares of common stock is generally the amount paid for such shares of common stock (less the amount of any distribution received by such holder treated as a tax-free return of capital).

 

Any such gain or loss will be long-term capital gain or loss if a U.S. holder’s holding period in the shares of our common stock surrendered in the merger is greater than one year as of the date of the merger. Long-term capital gains of certain non-corporate holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of our common stock at different times and different prices, such U.S. holder must determine its adjusted tax basis, gain or loss and holding period separately with respect to each block of our common stock.

 

 

Information Reporting and Backup Withholding

 

Generally, information reporting requirements may apply in connection with payments made to U.S. holders in connection with the Merger.

 

Payments made in exchange for shares of our common stock pursuant to the merger may be subject, under certain circumstances, to information reporting and backup withholding (currently at a rate of 24%). To avoid backup withholding, a U.S. holder that does not otherwise establish an exemption should complete and return to the applicable withholding agent a properly completed and executed IRS Form W-9, certifying under penalties of perjury that such U.S. holder is a “United States person” (within the meaning of the tax code), that the taxpayer identification number provided is correct and that such U.S. holder is not subject to backup withholding.

 

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a holder’s U.S. federal income tax liability, if any, provided that such holder furnishes the required information to the IRS in a timely manner.

 

This summary of U.S. federal income tax consequences is intended only as a general summary of certain material U.S. federal income tax consequences of the merger to U.S. holders and is not tax advice. Holders of our common stock are urged to consult their own tax advisors to determine the particular tax consequences to them of the merger, including federal, estate, gift and other non-income tax consequences, the applicability and effect of the alternative minimum tax, the unearned income Medicare contribution tax and any other U.S. federal, and tax consequences under state, local, non-U.S. or other tax laws, including tax treaties.

 

Appraisal Rights

 

If the merger is consummated and certain conditions are met, stockholders of the Company (i) who continuously hold shares of Asensus common stock through the effective time, (ii) who did not vote their shares in favor of the adoption of the merger agreement, (iii) who are entitled to demand appraisal rights under Section 262 of the DGCL, (iv) who otherwise properly comply with the applicable requirements and procedures of Section 262 of the DGCL, and (v) who do not thereafter withdraw their demand for appraisal of such shares, fail to perfect or otherwise lose their appraisal rights, in each case in accordance with Section 262 of the DGCL, will be entitled to demand appraisal of their shares and receive, if the merger is successful and the merger is consummated, in lieu of the merger consideration, an amount in cash equal to the “fair value” of their shares (as of the effective time, exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any), as determined by the Delaware Court of Chancery, in accordance with Section 262 of the DGCL. Stockholders should be aware that the fair value of their shares could be more than, the same as or less than the merger consideration and that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the merger, is not an opinion as to, and does not otherwise address, fair value under Section 262 of the DGCL. Any stockholder contemplating the exercise of such appraisal rights should review carefully the provisions of Section 262 of the DGCL, particularly the procedural steps required to properly demand and perfect such rights.

 

The following is a summary of the procedures to be followed by stockholders that wish to exercise their appraisal rights under Section 262 of the DGCL, the full text of which is attached to this proxy as Appendix C. This summary does not purport to be a complete statement of, and is qualified in its entirety by reference to, Section 262 of the DGCL. All references in Section 262 of the DGCL and in this summary to a stockholder are to the record holder of shares immediately prior to the Effective Time of the merger as to which appraisal rights are asserted. A person holding a beneficial interest in shares held of record in the name of another person, such as a broker or nominee, must act promptly to cause the stockholder of record to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. Failure to follow any of the procedures of Section 262 of the DGCL may result in termination or waiver of appraisal rights under Section 262 of the DGCL. Stockholders should assume that the Company will take no action to perfect any appraisal rights of any stockholder.

 

 

Any stockholder who desires to exercise his, her or its appraisal rights should review carefully Section 262 of the DGCL and is urged to consult his, her or its legal advisor before electing or attempting to exercise such rights. The following summary does not constitute any legal or other advice nor does it constitute a recommendation that Asensus stockholders exercise appraisal rights under Section 262 of the DGCL.

 

Under the DGCL, if you do not wish to accept the merger consideration provided for in the merger agreement for your shares of Asensus common stock, you have the right to seek appraisal of your shares and to receive payment in cash for the fair value of your shares, exclusive of any element of value arising from the accomplishment or expectation of the merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be fair value. The “fair value” of your shares of Asensus common stock as determined by the Delaware Court of Chancery may be more or less than, or the same as, the merger consideration that you are otherwise entitled to receive under the terms of the merger agreement. These rights are known as appraisal rights. Strict compliance with the statutory procedures in Section 262 is required. Failure to follow precisely any of the statutory requirements will result in the loss of your appraisal rights. Stockholders wishing to exercise the right to seek an appraisal of their shares of Asensus common stock must do all of the following:

 

 

The stockholder who wishes to exercise appraisal rights must vote against the proposal to approve and adopt the merger agreement;

 

 

The stockholder must deliver to Asensus a written demand for appraisal before the vote on the proposal to approve and adopt the merger agreement at the special meeting;

 

 

The stockholder must continuously hold the shares from the date of making the demand through the effective time. A stockholder will lose appraisal rights if the stockholder transfers the shares before the effective time; and

 

 

The stockholder or the surviving corporation must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of the shares within 120 days after the effective time. The surviving corporation is under no obligation to file any petition and has no intention of doing so.

 

The following summary does not constitute any legal or other advice, nor does it constitute a recommendation that stockholders exercise their appraisal rights under Section 262 of the DGCL.

 

Section 262 of the DGCL requires that, where a merger agreement is to be submitted for adoption at a meeting of stockholders, the stockholders be notified, not less than 20 days before the meeting to vote on the merger, that appraisal rights will be available. This proxy statement constitutes notice to Asensus’ stockholders that appraisal rights are available in connection with the merger, in compliance with the requirements of Section 262 of the DGCL. Failure to comply timely and properly with the requirements of Section 262 of the DGCL will result in the loss of your appraisal rights under the DGCL.

 

If you elect to demand appraisal of your shares of Asensus common stock, you must do all of the following:

 

 

(i)

you must deliver to Asensus a written demand for appraisal of your shares of common stock before the vote is taken on the proposal to adopt the merger agreement, which must reasonably inform Asensus of the identity of the holder of record of such Asensus common stock and that the stockholder intends thereby to demand appraisal of his, her or its shares of Asensus common stock. This written demand for appraisal must be in addition to and separate from any proxy or vote abstaining from or voting against the adoption of the merger agreement. Voting “AGAINST” or failing to vote “FOR” the adoption of the merger agreement by itself does not constitute a demand for appraisal within the meaning of Section 262 of the DGCL;

 

 

(ii)

you must not vote, or abstain from voting, or submit a proxy in favor of the proposal to adopt the merger agreement;

 

 

(iii)

you must continuously hold the shares from the date of making the demand through the effective time; and

 

 

 

(iv)

you must comply with the procedures of Section 262 of the DGCL for perfecting appraisal rights thereafter, including filing of a petition in the Delaware Court of Chancery requesting a determination of the fair value of your shares of common stock within 120 days after the effective time of the merger.

 

Appraisal rights will be lost if the shares of Asensus common stock are transferred prior to the effective time. Voting against or failing to vote for the proposal to adopt the merger agreement by itself does not constitute a demand for appraisal within the meaning of Section 262 of the DGCL. A proxy that is submitted and does not contain voting instructions will, unless revoked, be voted in favor of the proposal to adopt the merger agreement, will constitute a waiver of the stockholder’s right of appraisal and will nullify any previously delivered written demand for appraisal. Therefore, a stockholder who submits a proxy and who wishes to exercise appraisal rights must either submit a proxy containing instructions to vote against the proposal to adopt the merger agreement or abstain from voting on the proposal to adopt the merger agreement. The written demand for appraisal must be in addition to and separate from any proxy or vote on the proposal to adopt the merger agreement.

 

Written Demand for Appraisal

 

All demands for appraisal should be addressed to Asensus Surgical, Inc., 1 TW Alexander Drive, Suite 160, Durham, North Carolina 27703, Attention: Corporate Secretary, and must be delivered before the vote is taken on the proposal to adopt the merger agreement at the special meeting, and should be executed by, or on behalf of, the record holder of the shares of Asensus common stock. The demand must reasonably inform Asensus of the identity of the stockholder and the intention of the stockholder to demand appraisal of his, her or its shares of Asensus common stock.

 

To be effective, a demand for appraisal by a stockholder must be made by, or in the name of, the record stockholder, fully and correctly, as the stockholder’s name appears on the stockholder’s stock certificate(s) or in the transfer agent’s records, in the case of uncertificated shares. The demand cannot be made by the beneficial owner if he or she does not also hold the shares of Asensus common stock of record. The beneficial holder must, in such cases, have the registered owner, such as a bank, brokerage firm or other nominee, submit the required demand in respect of those shares of Asensus common stock. If you hold your shares of Asensus common stock through a bank, brokerage firm or other nominee and you wish to exercise appraisal rights, you should consult with your bank, brokerage firm or the other nominee to determine the appropriate procedures for the making of a demand for appraisal by the nominee.

 

Within 10 days after the effective time, the surviving corporation must give notice of the date that the merger has become effective to each of the Asensus stockholders who have properly filed a written demand for appraisal and who did not vote in favor of the proposal to adopt the merger agreement. At any time within 60 days after the effective time, any stockholder who has not commenced an appraisal proceeding or joined a proceeding as a named party may withdraw the demand and accept the merger consideration specified by the merger agreement for that stockholder’s shares of Asensus common stock by delivering to the surviving corporation a written withdrawal of the demand for appraisal.

 

Filing a Petition for Appraisal

 

Within 120 days after the effective time, but not thereafter, either the surviving corporation or any stockholder who has complied with the requirements of Section 262 and is entitled to appraisal rights under Section 262 may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the value of the shares of Asensus common stock held by all stockholders entitled to appraisal. The holders of Asensus common stock who desire to have their shares appraised should initiate all necessary action to perfect their appraisal rights within the time and manner prescribed by Section 262. In addition, within 120 days after the effective time, any stockholder who has properly filed a written demand for appraisal and who has complied with all requirements for exercising appraisal rights, upon written request, will be entitled to receive from the surviving corporation, a statement setting forth the aggregate number of shares of Asensus common stock not voted in favor of the merger agreement and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. The Delaware Court of Chancery may require stockholders who have demanded an appraisal for their shares of Asensus common stock and who hold stock represented by certificates to submit their stock certificates to the Register in Chancery for notation of the pendency of the appraisal proceedings; and if any stockholder fails to comply with that direction, the Delaware Court of Chancery may dismiss the proceedings as to that stockholder.

 

 

If a petition for appraisal is duly filed by any stockholder and a copy of the petition is delivered to the surviving corporation, the surviving corporation will then be obligated within twenty (20) days after receiving service of a copy of the petition to file with the Delaware Register in Chancery a duly verified list (the “Verified List”) containing the names and addresses of all stockholders who have demanded an appraisal for their shares (the “Dissenting Stockholders”) and with whom agreements as to the value of their shares has not been reached. Upon the filing of a petition by a Dissenting Stockholder, the Delaware Court of Chancery may order a hearing and that notice of the time and place fixed for the hearing on the petition will be mailed to the surviving corporation and all the Dissenting Stockholders shown on the Verified List. Notice will also be published at least one (1) week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in another publication deemed advisable by the Delaware Court of Chancery. The costs relating to these notices will be borne by the surviving corporation.

 

If a hearing on the petition is held, the Delaware Court of Chancery is empowered to determine which Dissenting Stockholders have complied with the provisions of Section 262 of the DGCL and are entitled to an appraisal of their shares. The Delaware Court of Chancery may require that Dissenting Stockholders submit their share certificates, if any, to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceedings. The Delaware Court of Chancery is empowered to dismiss the proceedings as to any Dissenting Stockholder who does not comply with such requirement. Accordingly, Dissenting Stockholders are cautioned to retain their share certificates after the Effective Time and thereafter comply with all orders of the Delaware Court of Chancery in respect of such certificates. In addition, assuming the shares remain listed on a national securities exchange immediately before the Effective Time, which we expect to be the case, the Delaware Court of Chancery is required to dismiss the appraisal proceedings as to all Dissenting Stockholders unless (i) the total number of shares entitled to appraisal exceeds one percent (1%) of the outstanding shares eligible for appraisal or (ii) the value of the consideration provided in the merger for such total number of shares exceeds $1 million.

 

Determination of Fair Value

 

After the Delaware Court of Chancery determines which stockholders are entitled to appraisal of their shares of Asensus common stock, the appraisal proceeding will be conducted in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Delaware Court of Chancery will appraise the shares of Asensus common stock, determining their fair value as of the effective time after taking into account all relevant factors exclusive of any element of value arising from the accomplishment or expectation of the merger, together with interest, if any, to be paid upon the amount determined to be the fair value. When the value is determined, the Delaware Court of Chancery will direct the payment of such value together with interest, if any, to Asensus stockholders entitled to receive the same. Unless the Delaware Court of Chancery in its discretion determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate as established from time to time during the period between the effective time and the date of payment of the judgment. However, at any time before the entry of judgment in the proceedings, the surviving corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case interest will accrue thereafter only upon the sum of (i) the difference, if any, between the amount so paid by the surviving corporation and the fair value of the shares as determined by the Delaware Court of Chancery, and (ii) interest accrued before such voluntary cash payment, unless paid at that time.

 

 

In determining fair value, the Delaware Court of Chancery is to take into account all relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods that are generally considered acceptable in the financial community and otherwise admissible in court” should be considered, and that “fair price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court stated that, in making this determination of fair value, the Delaware Court of Chancery must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged corporation. In Weinberger, the Supreme Court of Delaware also stated that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may be considered.” Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion that does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. An opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a merger is not an opinion as to fair value under Section 262 of the DGCL. You should be aware that the fair value of your shares as determined under Section 262 of the DGCL could be more than, the same as, or less than the merger consideration that you would otherwise be entitled to receive under the terms of the merger agreement.

 

Upon application by the surviving corporation or by stockholder entitled to participate in the appraisal proceeding, the Delaware Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any stockholder whose name appears on the Verified List and who has submitted such stockholder’s stock certificates, if any, to the Delaware Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights. When the fair value of the shares is determined, the Delaware Court of Chancery will direct the payment of such value, with interest thereon, if any, to the stockholders entitled thereto, forthwith in the case of uncertificated stockholders or upon surrender by certificated stockholders of their stock certificates. The Delaware Court of Chancery’s decree may be enforced as other decrees in the Delaware Court of Chancery may be enforced. The Delaware Court of Chancery may also determine the costs of the appraisal proceeding (which do not include attorneys’ fees or the fees and expenses of experts) may be determined by the Delaware Court of Chancery and taxed upon the parties as the Delaware Court of Chancery deems equitable in the circumstances. Upon the application of a stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts used in the appraisal proceeding, to be charged pro rata against the value of all shares of Asensus common stock or preferred stock entitled to appraisal. If no petition for appraisal is filed within 120 days after the effective time, or if the stockholder otherwise fails to perfect, successfully withdraws or loses such holder’s right to appraisal, then the right of that stockholder to appraisal will cease and that stockholder will be entitled to receive the merger consideration (without interest) for his, her or its shares of Asensus common stock pursuant to the merger agreement.

 

If any stockholder who demands appraisal of shares under Section 262 of the DGCL fails to perfect, successfully withdraws or loses such stockholder’s right to appraisal, such stockholder’s shares will be deemed to have been converted at the effective time into the right to receive the merger consideration. A stockholder will fail to perfect, or effectively lose, the stockholder’s right to appraisal if no petition for appraisal is filed within 120 days after the effective date of the merger. Inasmuch as the Company has no obligation to file such a petition and has no present intention to do so, any stockholder who desires such a petition is advised to file it on a timely basis. In addition, a stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw his, her or its demand for appraisal in accordance with Section 262 of the DGCL and accept the merger consideration by delivering to the Company a written withdrawal of such stockholder’s demand for appraisal and acceptance of the terms of the merger either within sixty (60) days after the effective date of the merger or thereafter with the written approval of the Company. Notwithstanding the foregoing, no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; providedhowever, that the limitation set forth in this sentence will not affect the right of any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the merger consideration within sixty (60) days after the effective date of the merger.

 

STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE OR BANK ACCOUNTS OR OTHER NOMINEE FORMS, AND WHO WISH TO EXERCISE APPRAISAL RIGHTS, SHOULD CONSULT WITH THEIR BROKERS, BANKS AND NOMINEES, AS APPLICABLE, TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BROKER, BANK OR OTHER NOMINEE HOLDER TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER, BANK OR OTHER NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO PERFECT APPRAISAL RIGHTS.

 

In view of the complexity of Section 262 of the DGCL, Asensus stockholders who may wish to pursue appraisal rights should consult their own legal and financial advisors.

 

 

THE MERGER AGREEMENT

 

The following is a summary of certain material terms of the merger agreement. The summary is not complete and must be read together with the merger agreement, a copy of which is attached as Appendix A. We encourage you to read the merger agreement carefully and in its entirety because the rights and obligations of the parties are governed by the express terms of the merger agreement and not by this summary or any other information contained in this proxy statement. This summary may not contain all the information about the merger agreement that is important to you. Certain terms used in this summary, whether or not capitalized, are defined in the merger agreement.

 

Please note that the representations, warranties, covenants and agreements in the merger agreement were made only for purposes of the merger agreement, and may not represent the actual state of facts.

 

Structure and Corporate Effects of the Merger

 

At the effective time of the merger, Merger Sub will merge with and into Asensus, and the separate corporate existence of Merger Sub will cease. Asensus will be the surviving corporation in the merger and will continue its corporate existence as a Delaware corporation and a wholly-owned subsidiary of Parent.

 

At the effective time of the merger, the certificate of incorporation of Asensus will, by virtue of the merger, be amended and restated in its entirety to read the same as the certificate of incorporation included as Annex II to the merger agreement and will be the certificate of incorporation of the surviving corporation, except that the name of the surviving corporation will be the name and date of incorporation of the Company. Also at the effective time of the merger, the bylaws of the Company will be amended and restated in their entirety to read the same as the bylaws of Merger Sub (except that the name of the surviving corporation shall be the name of the Company), and such bylaws will be the bylaws of the surviving corporation.

 

The directors of Merger Sub immediately prior to the effective time will, from and after the effective time, be the directors of the surviving corporation, and the officers of the Company immediately prior to the effective time will, from and after the effective time, be the officers of the surviving corporation, in each case, until their respective successors have been duly elected, designated or qualified, or until their earlier death, disqualification, resignation or removal, in accordance with the surviving corporation’s certificate of incorporation and bylaws.

 

Timing of the Merger

 

The closing of the merger will take place on (a) a date that is two (2) business days after the satisfaction or waiver (to the extent permitted by applicable law) of the conditions set forth in the merger agreement to be satisfied or waived (other than those conditions that by their nature are to be satisfied at the closing of the merger, but subject to the satisfaction or waiver of such conditions) or (b) such other time, location and date as Parent, Merger Sub and the Company mutually agree in writing. These conditions are described under “Conditions to Completion of the Merger” on page 69. The date on which the closing occurs is sometimes referred to as the closing date.

 

At the closing, we will file the certificate of merger with the Secretary of State of the State of Delaware. The merger will become effective at the time when the certificate of merger is filed or at such later date or time as may be agreed by Asensus, Merger Sub and Parent and specified in the certificate of merger. The date and time the merger becomes effective is referred to as the “effective time.”

 

Effect of the Merger on Our Common Stock

 

Each share of our common stock that is issued and outstanding immediately prior to the effective time of the merger (other than shares that are owned by Asensus as treasury stock and any shares owned by Parent or Merger Sub and any dissenting shares) will be converted into the right to receive $0.35 in cash, without interest and less any applicable withholding taxes. At the effective time of the merger, the shares will no longer be outstanding and will automatically be cancelled and will cease to exist, and each holder thereof will cease to have any rights with respect thereto, except the right to receive the merger consideration and for any stockholders who elect to pursue dissenter’s rights, their rights as dissenting stockholders under applicable law.

 

 

At the effective time of the merger, each share of common stock of Merger Sub outstanding immediately prior to the effective time of the merger will be converted into and become one validly issued, fully paid and nonassessable share of common stock of the surviving corporation.

 

Any shares subject to an option or a restricted stock award will be treated as described under “Treatment of Asensus Equity Awards” below.

 

Treatment of Asensus Equity Awards

 

Company Stock Options: As of the effective time, each Company Option granted by the Company under any of the Company Incentive Plans that is outstanding as of immediately prior to the effective time of the merger, or the “effective time,” whether or not then vested, will be cancelled and will immediately cease to be outstanding, without any payment with respect to such Company Option or cancellation thereof except as provided in the following sentences.  At the effective time, each Company Option that is subject to a vesting schedule (“Unvested Option”) shall be canceled and converted into the conditional right to receive an amount in cash (an “Unvested Cash Option Award”) equal to the product of (1) the excess, if any, of (x) the merger consideration over (y) the per share exercise price for such Unvested Option, and (2) the total number of shares of common stock underlying such Unvested Option, less applicable tax withholdings, subject to the same vesting schedule and other terms and conditions set forth in the applicable documents immediately prior to the effective time, except for terms rendered inoperative by reason of the transactions contemplated by the merger agreement or for such other administrative or ministerial changes made in connection with the administration of such Unvested Cash Option Awards following the effective time. With respect to each Unvested Cash Option Award, Parent shall cause the surviving corporation to pay the holder the applicable amount in the first payroll immediately following the applicable vesting date of such Unvested Cash Option Award. No consideration will be paid with respect to any Company Option that has a per-share exercise price that is greater than, or equal to, the merger consideration. As of the effective time, no person will retain any rights with respect to any previously outstanding Company Options other than the rights of a holder to receive any payment contemplated by the merger agreement.

 

Time-Based Restricted Stock Units: As of the effective time, each Company RSU that is unvested and outstanding as of immediately prior to the effective time will be cancelled and will immediately cease to be outstanding, without any payment with respect to such Company RSU or cancellation thereof except as provided in the following sentences. At the effective time, each Unvested RSU shall be converted into the conditional right to receive an Unvested Cash RSU Award equal to the product of (A) the total number of shares of common stock underlying such Unvested RSU and (B) the merger consideration, less applicable tax withholdings, subject to the same vesting schedule and other terms and conditions set forth in the applicable documents (including any applicable Company Incentive Plan and RSU agreement or other document evidencing such Unvested RSU) immediately prior to the effective time, except for terms rendered inoperative by reason of the transactions contemplated by the merger agreement or for such other administrative or ministerial changes made in connection with the administration of such Unvested Cash RSU Awards following the effective time.

 

Performance-Based Restricted Stock Units: As of the effective time, each Company PRSU that is unvested and outstanding as of immediately prior to the effective time will be cancelled and will immediately cease to be outstanding, without any payment with respect to such Company PRSU or cancellation thereof except as provided in the following sentences. 

 

Each Vested PRSU will vest as of and contingent upon the effective time (“Vested PRSU”). In full satisfaction of the cancellation of each Vested PRSU, Parent will cause the surviving corporation, as soon as reasonably practicable following the effective time, to pay, in accordance with the general payroll practices of the surviving corporation, to the holder of such Vested PRSU, an amount in cash in respect thereof equal to the product of (i) the merger consideration and (ii) the total number of shares of common stock underlying such Vested PRSU, less applicable tax withholdings. 

 

 

At the effective time, each Unvested PRSU shall be converted into Unvested Cash PRSU Award equal to the product of (A) the total number of shares of common stock underlying such Unvested PRSU and (B) the merger consideration, less applicable tax withholdings, subject to the same vesting schedule and other terms and conditions set forth in the applicable documents (including any applicable Company Incentive Plan and PRSU agreement or other document evidencing such Unvested PRSU) immediately prior to the effective time, including all performance-based vesting conditions, except for terms rendered inoperative by reason of the transactions contemplated by the merger agreement or for such other administrative or ministerial changes made in connection with the administration of such Unvested Cash PRSU Awards following the effective time. With respect to each Unvested Cash PRSU Award, Parent shall cause the surviving corporation to determine satisfaction of the performance goals promptly following the end of the applicable performance period, and Parent shall cause the surviving corporation to pay the holder the applicable amount in the first payroll immediately following the applicable vesting date of such Unvested Cash PRSU Award. 

 

As of the effective time, the Company Incentive Plans will terminate and all rights under any other plan, program or arrangement providing for the issuance or grant of any other interest with respect to the capital stock of the Company or any Company subsidiary will be cancelled.  

 

Payment for Common Stock in the Merger

 

At or prior to the effective time of the merger, Parent will deposit cash in U.S. dollars in an amount sufficient to pay the aggregate merger consideration with Continental Stock Transfer & Trust Company, which we refer to as the “paying agent.” These funds may not be used for any purpose other than payment of the merger consideration.

 

Upon receipt of such evidence, if any, as the paying agent may reasonably request, each holder of book-entry shares will be entitled to receive payment of the merger consideration, subject to any required withholding taxes.

 

Promptly after the effective time of the merger, Parent will cause the paying agent to mail to each holder of record of shares of our common stock whose shares were converted into the right to receive the merger consideration (1) a letter of transmittal and (2) instructions for effecting the surrender of certificates or book-entry shares formerly representing shares of our common stock in exchange for the merger consideration. Upon surrender of certificates (or effective affidavits of loss in lieu of certificates and, if required, the posting of a bond) or book-entry shares, as applicable, to the paying agent together with the letter of transmittal, completed and executed in accordance with the instructions to the letter of transmittal, and such other documents as may customarily be required by the paying agent, the holder of such certificates (or effective affidavits of loss in lieu of certificates) or book-entry shares will be entitled to receive the merger consideration for all such shares, and any certificates surrendered in this manner will be cancelled.

 

Representations and Warranties; Material Adverse Effect

 

In the merger agreement, we make representations and warranties to Parent and Merger Sub, subject to certain exceptions in the merger agreement, in the Company’s disclosure letter delivered to Parent in connection with the merger agreement and in certain of our public filings, as to, among other things:

 

 

organization and qualification to do business;

 

 

capitalization of the Company and its subsidiaries;

 

 

authority relative to the merger agreement;

 

 

no conflict and required filings and consents;

 

 

our SEC documents and financial statements;

 

 

absence of certain changes or events;

 

 

 

no undisclosed liabilities;

 

 

litigation matters;

 

 

product liability;

 

 

permits and compliance with laws;

 

 

employee benefit plans;

 

 

labor matters;

 

 

taxes;

 

 

material contracts;

 

 

intellectual property;

 

 

real and personal property;

 

 

environmental matters;

 

 

customers and suppliers;

 

 

Foreign Corrupt Practices Act, anti-corruption and sanctions;

 

 

regulatory compliance;

 

 

data privacy and information security;

 

 

insurance;

 

 

takeover statutes;

 

 

no TID U.S. business;

 

 

brokers;

 

 

opinion of Asensus’ financial advisor;

 

 

interested party transactions; and

 

 

information in the proxy statement.

 

In the merger agreement, Parent and Merger Sub also make representations and warranties to us, subject to certain exceptions in the merger agreement, as to, among other things:

 

 

organization and qualification to do business;

 

 

authority and binding nature of the merger agreement;

 

 

no conflict and required filings and consents;

 

 

 

litigation matters;

 

 

brokers;

 

 

sufficient funds to effect the merger;

 

 

ownership of Merger Sub;

 

 

no interested stockholder; and

 

 

no other representations and warranties.

 

Some of Asensus’ representations and warranties in the merger agreement are qualified by materiality or knowledge qualifications or a “Company Material Adverse Effect” qualification with respect to Asensus, as discussed below.

 

“Company Material Adverse Effect” means any effect, change, development or occurrence that has had, or would reasonably be expected to have, a material adverse effect, individually or in the aggregate, (a) on the business, condition (financial or otherwise), assets, liabilities or results of operations of the Company and each Company subsidiary, taken as a whole; provided, however, that any effect, change, development or occurrence resulting from the following will not be taken into account in determining whether a Company Material Adverse Effect has occurred: (i) changes in general United States or global economic, regulatory or financial market conditions, (ii) changes in the economic, business and financial environment generally affecting the medical device industry, (iii) in and of itself, any change in the Company’s stock price or any failure by the Company to meet any revenue, earnings or other similar internal or analysts’ projections (it being understood that any effect, change, development or occurrence giving rise to or contributing to such change or failure may be deemed to constitute, or be taken into account in determining whether there has been, a Company Material Adverse Effect), (iv) an act of terrorism or an outbreak or escalation of hostilities or war (whether or not declared) or any natural disasters, health emergencies, including pandemics or epidemics, or other similar force majeure events, including any worsening of such conditions existing as of the date of the merger agreement, (v) any adoption, implementation, promulgation, repeal, modification, amendment or other changes in laws or GAAP, (vi) any event, occurrence, circumstance, change or effect arising from fluctuations in the value of any currency or interest rates, (vii) the public announcement or pendency of the merger or the other transactions contemplated hereby (it being understood and agreed that this clause (vii) will not apply to the representation or warranty contained in Section 3.4 of the merger agreement), (viii) any event, occurrence, circumstance, change or effect resulting or arising from the identity of Parent or Merger Sub as the acquiror of the Company; (ix) the changes set forth in the Company’s disclosure letter under the heading Annex A, “Company Material Adverse Effect” or (x) any statement in the Company SEC documents to the effect that the Company may cease to qualify as a “going concern”; provided, further, that if the effects, changes, developments, events or occurrences set forth in clauses (i), (ii), (iv), (v) and (vi) above, have a disproportionate impact on the Company and each Company subsidiary, taken as a whole, relative to the other participants in the medical device industry, such effects, changes, developments or occurrences may be taken into account in determining whether a Company Material Adverse Effect has occurred to the extent of such disproportionate impact or (b) on the ability of the Company to perform its obligations in accordance with the merger agreement or to prevent or materially delay the consummation of the merger or any of the other transactions contemplated hereby.

 

Conduct of the Business Pending the Merger

 

Affirmative Obligations of the Company

 

The Company covenants and agrees that, between the date of the merger agreement and the earlier of the effective time and the date, if any, on which the merger agreement is terminated in accordance with Section 8.1 of the merger agreement, except (i) as required by law, (ii) as may be consented to in writing by Parent (which consent will not be unreasonably withheld, conditioned or delayed), (iii) as may be required in accordance with the merger agreement or (iv) as set forth in Section 5.1 of the Company’s disclosure letter, the Company will, and will cause the Company subsidiaries to, conduct in all material respects the business of the Company and the Company subsidiaries in the ordinary course of business consistent with past practice and, to the extent consistent therewith, use reasonable best efforts to preserve its material assets and business organization intact in all material respects and maintain its material existing business relations and goodwill.

 

 

Covenants of the Company

 

Without limiting the generality of the obligations described above, except (i) as required by law, (ii) as may be consented to in writing by Parent (which consent will not be unreasonably withheld, conditioned or delayed), (iii) required in accordance with the merger agreement or (iv) as set forth in Section 5.1 of the Company’s disclosure letter, the Company will not, and will cause each Company subsidiary not to:

 

(A)    amend or otherwise change the Company’ organizational documents;

 

(B)    adjust, split, reverse split, combine, subdivide, reclassify, redeem, purchase, repurchase or otherwise acquire, directly or indirectly, or amend, the Company’s or any Company subsidiary’s securities, including any options, equity or equity-based compensation, restricted stock, restricted stock units, performance stock units, warrants, convertible securities or other rights of any kind to acquire any of such securities, other than in connection with withholding to satisfy the exercise price and/or Tax obligations with respect to Company Options, Company RSUs or Company PRSUs pursuant to the terms thereof (as in effect as of the date hereof);

 

(C)    issue, sell, pledge, modify, transfer, dispose of, encumber or grant, or authorize the same with respect to, directly or indirectly, any of the Company’s or any Company subsidiary’s securities, including any options, equity or equity-based compensation, restricted stock, restricted stock units, performance stock units, warrants, convertible securities or other rights of any kind to acquire such securities or the value of which is measured by such securities; provided, however, that the Company may issue shares of common stock upon the exercise of Company Options or vesting and settlement of Company RSUs or Company PRSUs outstanding on the Capitalization Date as required by their respective terms;

 

(D)    declare, set aside, authorize, make or pay any dividend or other distribution payable in cash, stock, property or otherwise with respect to the Company’s or any Company subsidiary’s securities;

 

(E)    (1) establish, adopt, enter into, amend, modify or terminate any benefit plan, or any plan, program, policy, practice, agreement or other arrangement that would be a benefit plan if it had been in existence on the date of the merger agreement, (2) grant or pay any bonus, incentive, change in control, retention, severance, termination, tax gross-up or profit-sharing award or payment, or increase the base salary and/or cash bonus opportunity or other compensation of any current or former director, officer, employee, or individual service provider of the Company or any Company subsidiary, except in each case, as required by law or required in accordance with a benefit plan in effect as of the date of the merger agreement, so long as such benefit plan has been disclosed as of the date of the merger agreement on the Company’s disclosure letter, (3) except as required by any benefit plan in effect as of the date of the merger agreement, accelerate or take any action to accelerate any payment or benefit, or the funding of any payment or benefit, payable or to become payable to any current or former director, officer, employee or individual service provider of the Company or any Company subsidiary, (4) provide any broad-based written communication to the employees of the Company or any Company subsidiary with respect to the compensation, benefits or other treatment they will receive following the effective time unless such communication is (I) approved by Parent in advance of such communication or (II) required by law, or (5) except as may be required by GAAP, materially change the manner in which contributions to such broad-based benefit plans are made or the basis on which such contributions are determined;

 

(F)    hire, engage, promote, or terminate (other than for cause) the employment or engagement of any employee or individual independent contractor with annual base compensation in excess of $145,000;

 

(G)    take any action that would constitute a “Mass Layoff” or “Plant Closing” within the meaning of the WARN Act or require notice to employees, or trigger any other obligations or liabilities, under the WARN Act or any similar state, local or foreign law;

 

 

(H)    make any loan or advance to (other than travel and similar advances to its employees in the ordinary course of business and consistent with past practice), or capital contribution to, or investment in, any person (other than any wholly owned Company subsidiary);

 

(I)    forgive any loans or advances to any officers, employees, directors or other individual service providers of the Company or any Company subsidiary, or any of their respective Affiliates, or change its existing borrowing or lending arrangements for or on behalf of any of such persons in accordance with an employee benefit plan or otherwise, except in the ordinary course of business in connection with relocation activities to any employees of the Company or any Company subsidiary;

 

(J)    acquire (including by merger, consolidation, acquisition of stock or assets or otherwise) any corporation, partnership, limited liability company, joint venture, other business organization, any equity interest in any of the foregoing, any real estate or all or any material portion of the assets, business or properties of any person;

 

(K)    (1) sell, pledge, dispose of, transfer, abandon, lease, license, mortgage, incur any Lien (other than Permitted Liens) (including under any sale-leaseback transaction or an asset securitization transaction) on or otherwise transfer or encumber any portion of the tangible or intangible assets, business, properties or rights of the Company or any Company subsidiary except in the ordinary course of business and consistent with past practice, (2) enter into any new line of business or (3) create any new Subsidiary;

 

(L)    (1) pay, discharge or satisfy any Indebtedness that has a prepayment cost, “make whole” amount, prepayment penalty or similar obligation (other than Indebtedness incurred by the Company or any wholly owned Company subsidiary and owed to the Company or any wholly owned Company subsidiary) or (2) cancel any material Indebtedness (individually or in the aggregate) or settle, waive or amend any claims or rights of substantial value;

 

(M)     (1) except for Indebtedness incurred under the Note, incur, create, assume or otherwise become liable or responsible for any Indebtedness, including by the issuance of any debt security, (2) assume, guarantee, endorse or otherwise become liable or responsible for any Indebtedness of any person, or (3) issue or sell any debt securities of the Company or any Company subsidiary, including options, warrants, calls or other rights to acquire any debt securities of the Company or any Company subsidiary;

 

(N)    negotiate, amend, extend, renew, terminate or enter into, or agree to any amendment or modification of, or waive, release or assign any rights in accordance with, any Company Material Contract, any contract that would have been a Company Material Contract had it been entered into prior to the date of the merger agreement or any lease for any Company leased real property;

 

(O)    negotiate, amend, modify, extend, enter into or terminate any labor agreement;

 

(P)    make any material change to the Company’s or any Company subsidiary’s methods, policies and procedures of accounting, except as required by GAAP or Regulation S-X of the Exchange Act;

 

(Q)    make or agree to make any capital expenditure exceeding $50,000 during any fiscal quarter (except any capital expenditure that is provided for in the Company’s capital expense budget either delivered or made available to Parent or Parent’s Representatives prior to the date of the merger agreement, which expenditures shall be in accordance with the categories set forth in such budget);

 

(R)    write up, write down or write off the book value of any material assets except inventory adjustments in the normal course of business and/or as required by GAAP;

 

(S)    agree to or otherwise commence, release, compromise, assign, settle or resolve, in whole or in part, any threatened or pending Proceeding or insurance claim, other than settlements that result solely in monetary obligations involving payment (without the admission of wrongdoing) by the Company or any Company subsidiary of an amount not greater than $1,500,000 (net of insurance proceeds) in the aggregate;

 

 

(T)    fail to use commercially reasonable efforts to maintain in effect material insurance policies covering the Company and each Company subsidiary and their respective properties, assets and businesses;

 

(U)    (1) sell, transfer, assign, lease, license, sublicense or otherwise dispose of (whether by merger, stock or asset sale or otherwise) to any person (including any affiliate) any rights to any Company intellectual property, other than licensing non-exclusive rights in the ordinary course of business consistent with past practice, (2) cancel, dedicate to the public, disclaim, forfeit, allow to lapse or abandon (except with respect to Patents expiring in accordance with their terms) any Company intellectual property, (3) fail to make any filing, pay any fee, or take any other action necessary to prosecute and maintain in full force and effect any registered Company intellectual property, (4) make any change in Company intellectual property that does or would reasonably be expected to materially impair such Company intellectual property or the Company’s or any Company subsidiary’s rights with respect thereto, (5) disclose to any person (other than representatives of Parent and Merger Sub) any trade secrets, know-how or confidential or proprietary information, except, in the case of confidential or proprietary information, in the ordinary course of business to a person that is subject to reasonable and customary confidentiality obligations or (6) fail to take or maintain reasonable measures to protect the confidentiality and value of trade secrets included in any of the Company intellectual property;

 

(V)    except as required by law, (1) make, revoke or change any material tax election or adopt or change any material method of tax accounting, (2) file any amended material tax return, (3) settle or compromise any audit, assessment or other proceeding relating to a material amount of taxes, (4) request or agree to an extension or waiver of the statute of limitations with respect to federal income taxes or other material taxes, (5) enter into any “closing agreement” within the meaning of Section 7121 of the Code (or any similar provision of any law) with respect to any material tax, (6) surrender any right to claim a material tax refund, (7) knowingly fail to pay any material amount of tax that becomes due and payable (including estimated tax payments), or (8) incur taxes outside of the ordinary course of business;

 

(W)    merge or consolidate the Company or any Company subsidiary with any person or adopt a plan of complete or partial liquidation, dissolution, restructuring, recapitalization or other reorganization of the Company or any Company subsidiary; or

 

(X)    enter into any agreement, contract, commitment or arrangement to do, or adopt any resolutions approving or authorizing, or announce an intention to do, any of the foregoing.

 

Notwithstanding the foregoing, nothing contained herein will give to Parent or Merger Sub, directly or indirectly, rights to control or direct the operations of the Company or any Company subsidiary prior to the effective time, and the Company shall not be required to take any action or prohibited from taking any action required or prohibited by the merger agreement if the inclusion of such requirement or prohibition in the merger agreement would reasonably be expected to violate applicable Law (including any Antitrust Law). Prior to the effective time, each of Parent and the Company will exercise, consistent with the terms and conditions hereof, complete control and supervision of its and its Subsidiaries’ respective operations.

 

No Solicitation; Alternative Proposals

 

No Solicitation

 

From the date of the merger agreement, Asensus shall cease and terminate, and shall use reasonable best efforts to cause its representatives to cease and terminate, all solicitations, discussions, and negotiations with any person with respect to any offer or proposal or potential offer or proposal relating to any proposed transaction or series of related transactions, other than the transactions contemplated by the merger agreement, involving a Company Acquisition Proposal.  From the date of the merger agreement until the earlier of termination of the merger agreement or the effective time, Asensus will not and will cause its representatives not to directly or indirectly (A) initiate, solicit, knowingly encourage or facilitate the making of any offer or proposal which constitutes or is reasonably likely to lead to a Company Acquisition Proposal, (B) enter into any agreement with respect to a Company Acquisition Proposal or (C) engage in negotiations or discussions with, or provide any non-public information or data to, any person (other than Parent or any of its Affiliates or Representatives) relating to any Company Acquisition Proposal, or grant any waiver or release under any restriction from making a Company Acquisition Proposal, in each case, other than discussions solely to notify such person of the terms of the prohibition on solicitation or to clarify the terms and conditions of such proposal or offer. 

 

 

Superior Proposal

 

Notwithstanding the prohibition on solicitation, at any time following the date of the merger agreement and prior to the date on which the Company Requisite Vote (as defined below) is obtained, Asensus and its representatives may furnish non-public information concerning Asensus’ business, properties or assets to any person in accordance with a confidentiality agreement with terms no less favorable in the aggregate to Asensus than those contained in the confidentiality agreement and may participate in discussions and negotiations with such person concerning a Company Acquisition Proposal if, but only if, such person has submitted a bona fide proposal to Asensus relating to such Company Acquisition Proposal that the Asensus Board determines in good faith, after consultation with Asensus’ outside counsel and financial advisor, is or is reasonably likely to lead to a Superior Proposal.  From and after the date of the merger agreement and prior to the Stockholders Meeting, Asensus will promptly (and in any event within forty-eight (48) hours) notify Parent if Asensus or any Company subsidiary or representative receives (i) any Company Acquisition Proposal or indication by any person that it is considering making a Company Acquisition Proposal, (ii) any request for non-public information relating to Asensus or any Company subsidiary other than requests for information in the ordinary course of business and unrelated to a Company Acquisition Proposal or (iii) any inquiry or request for discussions or negotiations with respect to any Company Acquisition Proposal.  Asensus will provide Parent promptly (and in any event within such forty-eight (48) hour period) with the identity of such person and a correct and complete copy of such Company Acquisition Proposal, indication, inquiry or request (or, where such Company Acquisition Proposal is not in writing, a description of the material terms and conditions of such Company Acquisition Proposal, indication, inquiry or request), including any modifications thereto.  Asensus will keep Parent reasonably informed (orally and in writing) on a current basis (and in any event no later than forty-eight (48) hours after the occurrence of any material changes, developments, discussions or negotiations) of the status of any Company Acquisition Proposal, indication, inquiry or request (including the material terms and conditions thereof and of any modification thereto), and any material developments, discussions and negotiations, including furnishing copies of any written inquiries, correspondence, and draft documentation, and written summaries of any material oral inquiries or discussions.  Without limiting the foregoing, Asensus will promptly (and in any event within forty-eight (48) hours) notify Parent orally and in writing if it determines to begin providing information or to engage in discussions or negotiations concerning a Company Acquisition Proposal and will in no event begin providing such information or engaging in such discussions or negotiations prior to providing such notice.  Asensus will not, and will cause each Company subsidiary not to, enter into any agreement with any person subsequent to the date of the merger agreement that would restrict the Company’s ability to provide such information to Parent and neither Asensus nor any Company subsidiary is currently party to any agreement that prohibits Asensus from providing to Parent the information described in this Section 5.2(b).  Asensus (A) will not, and will cause each Company subsidiary not to, terminate, waive, amend or modify any provision of, or grant permission or request under, any standstill or confidentiality agreement to which it or any Company subsidiary is or becomes a party, and (B) will, and will cause each Company subsidiary to, use reasonable best efforts to enforce any such agreement unless the Asensus Board determines in good faith, after consultation with the Company’s outside counsel, that the failure to do so would be inconsistent with the fiduciary duties of the Asensus Board to the Company’s stockholders under applicable Law, in which event Asensus may take the actions described in these clauses (A) and (B) solely to the extent necessary to permit a third party to make, on a confidential basis to the Asensus Board, a Company Acquisition Proposal, conditioned upon such third party agreeing that Asensus shall not be prohibited from providing any information to Parent (including regarding any such Company Acquisition Proposal) in accordance with, and otherwise complying with, this provision, Asensus will promptly provide to Parent any non-public information concerning Asensus or any Company subsidiary provided or made available in accordance with this provision which was not previously provided or made available to Parent. For purposes of the merger agreement, a “Superior Proposal” is a written Company Acquisition Proposal that did not result from or involve a material breach of this provision and that proposes an acquisition of more than fifty percent (50%) of the equity securities or consolidated total assets of Asensus and the Company Subsidiaries on terms which the Asensus Board determines in its good faith judgment to be more favorable to the holders of the Shares than the transactions contemplated hereby (after consultation with the Company’s outside counsel and financial advisor), taking into account all the terms and conditions of such proposal and the merger agreement, which the Asensus Board has determined to be as or more reasonably likely to be completed on the terms proposed than the transactions contemplated by the merger agreement, taking into account all financial, regulatory, legal and other aspects of such proposal and the terms of the merger agreement.

 

 

No Change in Recommendation

 

Except as provided in the merger agreement, neither the Asensus Board nor any committee thereof will (i) make any Company Adverse Recommendation Change or (ii) enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, or similar agreement (an “Alternative Acquisition Agreement”) providing for the consummation of a transaction contemplated by any Company Acquisition Proposal (other than a confidentiality agreement referenced above entered into in the circumstances referenced above).  Asensus, promptly following a determination by the Asensus Board that a Company Acquisition Proposal is a Superior Proposal, will notify Parent of such determination.

 

Termination in Response to a Superior Proposal

 

Prior to the date on which the Company Requisite Vote (as defined below) is obtained, if (i) Asensus receives a Company Acquisition Proposal from a third person that is not in violation of such third person’s contractual obligations to Asensus, (ii) a material breach by Asensus of the prohibition on solicitation has not contributed to the making of such Company Acquisition Proposal and (iii) the Asensus Board concludes in good faith, after consultation with the Company’s outside counsel and financial advisor, that such Company Acquisition Proposal constitutes a Superior Proposal after giving effect to all of the adjustments of the merger agreement that are offered in writing by Parent, the Asensus Board may, if it determines in good faith, after consultation with the Company’s outside counsel, that failure to take such action would be inconsistent with its fiduciary duties to its stockholders, (A) effect a Company Adverse Recommendation Change or (B) terminate the merger agreement to enter into an Alternative Acquisition Agreement with respect to such Superior Proposal; provided, however, that Asensus will not terminate the merger agreement in accordance with clause (B) above, and any purported termination in accordance with clause (B) above will be void and of no force or effect, unless in advance of or concurrently with such termination Asensus (1) pays the termination fee and (2) immediately following such termination enters into a binding definitive Alternative Acquisition Agreement for such Superior Proposal; provided, further, that the Asensus Board may not effect a change of its recommendation in accordance with clause (A) above or terminate the merger agreement in accordance with clause (B) above unless (I) no material breach of the Company’s obligations regarding solicitation has occurred, (II) Asensus has provided prior written notice to Parent, at least three (3) business days in advance (the “Notice Period”), of its intention to take such action with respect to such Superior Proposal, which notice will specify the material terms and conditions of any such Superior Proposal (including the identity of the party making such Superior Proposal), and has contemporaneously provided a correct and complete copy of the proposed Alternative Acquisition Agreement with respect to such Superior Proposal, (III) prior to effecting such Company Adverse Recommendation Change or terminating the merger agreement to enter into a definitive Alternative Acquisition Agreement with respect to such Superior Proposal, Asensus has, and has caused its Representatives to, during the Notice Period, negotiate with Parent in good faith (to the extent Parent requests to negotiate) to make such adjustments in the terms and conditions of the merger agreement so that such Company Acquisition Proposal ceases to constitute a Superior Proposal and (IV) following any negotiation described in clause (3) above, the Asensus Board concludes in good faith, after consultation with the Company’s outside counsel and financial advisor, that such Company Acquisition Proposal continues to constitute a Superior Proposal.  In the event of any material revisions to the Superior Proposal after the start of the Notice Period, Asensus is required to deliver a new written notice to Parent and to comply with the requirements with respect to such new written notice, and the Notice Period will be deemed to have re-commenced on the date of such new notice, except that the references to three (3) business days shall be deemed two (2) business days.  Any Company Adverse Recommendation Change will not change the approval of the Asensus Board for purposes of causing any state takeover statute or other Law to be inapplicable to the transactions contemplated hereby.

 

Company Intervening Event

 

The Asensus Board may make a Company Adverse Recommendation Change in the absence of a Company Acquisition Proposal if a Company Intervening Event has occurred, and the Asensus Board has concluded in good faith, after consultation with the Company’s outside counsel, that failure to make a Company Adverse Recommendation Change on account of the Company Intervening Event would be inconsistent with its fiduciary duties, provided, however, that the Asensus Board will not make a Company Adverse Recommendation Change unless Asensus has (i) provided to Parent at least three (3) business days’ prior written notice advising Parent that the Asensus Board intends to take such action and specifying the Company Intervening Event in reasonable detail and (ii) during such three (3) business day period, if requested by Parent, engaged in good faith negotiations with Parent to amend the merger agreement in such a manner that obviates the need or reason for the Company Adverse Recommendation Change.

 

 

Return of Confidential Information

 

Asensus will promptly (but in no event later than three (3) business days after the date of the merger agreement) demand that each person that has executed a confidentiality agreement in connection with a potential Company Acquisition Proposal within the one-year period prior to the date of the merger agreement return (or destroy, to the extent permitted by the applicable confidentiality agreement) all confidential information furnished to such individual or entity by or on behalf of Asensus or any Company subsidiary.

 

Exchange Act Communications

 

Nothing in the merger agreement will prohibit Asensus from (i) taking and disclosing to the stockholders of Asensus a position contemplated by Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation M-A promulgated under the Exchange Act, including any “stop, look and listen” communication pursuant to Rule 14d-9(f) promulgated under the Exchange Act, or (ii) making any disclosure to the stockholders of Asensus that is required by applicable Law; provided that this provision will not be deemed to permit the Asensus Board to make a Company Adverse Recommendation Change except to the extent permitted above.

 

Company Stockholders Meeting

 

Subject to the relevant provisions of the merger agreement, we have agreed to convene and hold the special meeting within thirty (30) days of the initial mailing of this proxy statement for the purpose of seeking the approval and adoption of the merger agreement by the Company’s stockholders. If there are not sufficient affirmative votes represented in person or by proxy at such meeting to adopt the merger agreement we will adjourn the special meeting and reconvene at the earliest practicable date on which the board of directors reasonably expects to have sufficient affirmative votes to adopt the merger agreement. We may not adjourn the special meeting for more than fifteen (15) calendar days past the originally scheduled date of the meeting without Parent’s consent.

 

Employee Matters

 

The merger agreement provides that for twelve (12) months after the closing (or earlier termination of the relevant employee’s employment), (i) each employee of the Company or any Company subsidiary who continues to be employed by the surviving corporation or any of its subsidiaries following the effective time (a “Continuing Employee”) will be provided an annual base salary or wage rate and annual cash bonus opportunity that are, in each case, substantially comparable to the annual base salary or wage rate and annual cash bonus opportunity provided to such Continuing Employee as of immediately prior to the effective time, and (ii) Continuing Employees will be provided broad-based employee benefits that are substantially comparable in the aggregate to the broad-based employee benefits (excluding equity compensation, change in control, transaction or retention payments, defined benefit, nonqualified deferred compensation, severance benefits, post-retirement or retiree medical benefits (the “Excluded Benefits”)) that (A) are in effect immediately prior to the effective time or (B) are substantially comparable in the aggregate to the employee benefits provided to similarly situated Parent employees based on levels of responsibility and seniority (excluding the Excluded Benefits). Continuing Employees will also receive service credits under Parent vacation, health or welfare plans for all periods of employment with the Company or any Company subsidiary to the same extent and for the same purposes as such service was recognized under an analogous Company benefit plan, to the maximum extent permitted in accordance with the relevant Parent plan. The merger agreement also provides that Parent will use reasonable best efforts to cause any restrictions or limitations with respect to pre-existing condition exclusions and actively-at-work requirements to be waived for each Continuing Employee and his or her eligible dependents (except to the extent such exclusions or requirements were applicable under the corresponding Company plan), and permit such Continuing Employee to take into account any eligible expenses incurred by such employee and his or her covered dependents during the plan year in which the employee elects to be covered by the successor plan for purposes of satisfying all deductible, coinsurance and maximum out-of-pocket requirements.

 

 

Indemnification And Insurance

 

We expect to obtain a “tail” or “run-off” officers’ and directors’ liability insurance policy, including EPL and Fiduciary Liability Policy, in respect of acts or omissions occurring prior to the effective time of the merger covering our directors and officers currently covered by our officers’ and directors’ liability insurance policy. The new policy will be no less favorable than our policy currently in effect with respect to coverage, deductibles and amounts and will last for six years following the effective time of the merger. The price will not exceed 300% of the premium amount most recently paid prior to the effective time.

 

For the six-year period following the effective time, Parent agrees that all rights to indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the effective time (whether asserted or claimed prior to, at or after the effective time) (i) now existing in favor of the current or former directors or officers of the Company or any of the Company’s subsidiaries and (ii) any other indemnification or other similar agreements of the Company or any of the Company’s subsidiaries set forth in the Company disclosure schedule, in each case as in effect on the date of the merger agreement, shall continue in full force and effect in accordance with their terms, and Parent shall cause the Company and each of the Company’s subsidiaries to perform their obligations thereunder. Without limiting the foregoing, from the effective time until the sixth anniversary of the date on which the effective time of the merger occurs, (A) Parent shall cause the surviving corporation (together with its successors and assigns, the “Indemnifying Parties”) to, and the surviving corporation agrees that it will, to the fullest extent permitted under applicable law, indemnify and hold harmless each Indemnified Party in his or her capacity as an officer or director of the Company or any of the Company’s subsidiaries against all losses, claims, damages, liabilities, fees, expenses, judgments or fines incurred by such Indemnified Party as an officer or director of the Company or any of the Company’s subsidiary in connection with any pending or threatened proceeding based on or arising out of, in whole or in part, the fact that such Indemnified Party is or was a director or officer of the Company or any of the Company’s subsidiaries at or prior to the effective time of the merger and pertaining to any and all matters pending, existing or occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the effective time of the merger, including any such matter arising under any claim with respect to the transactions contemplated by the merger agreement and (B) the Indemnifying Parties shall, to the fullest extent permitted under applicable Laws, advance reasonable and documented out-of-pocket costs and expenses (including reasonable and documented attorneys’ fees) incurred by the Indemnified Parties in connection with matters for which such Indemnified Parties are eligible to be indemnified pursuant to the merger agreement within fifteen (15) days after receipt by the surviving corporation of a written request for such advance, subject to the execution by such Indemnified Parties of appropriate undertakings in favor of the Indemnifying Parties to repay such advanced costs and expenses if it is ultimately determined in a final and non-appealable judgment of a court of competent jurisdiction that such Indemnified Party is not entitled to be indemnified under the merger agreement.

 

In the event that the surviving corporation or any of its successors or assigns (i) consolidates with or merges into any other person or entity and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person or entity, then, and in each such case, the surviving corporation, as applicable, will cause proper provision to be made so that the successors and assigns of such surviving corporation assume the obligations set forth above, unless such result occurs by operation of law.

 

 

Efforts to Complete the Merger

 

Asensus, Parent and Merger Sub have each agreed to as promptly as possible, (i) make, or cause or be made, cooperate with the other party hereto and use (and shall cause its respective Affiliates to use) its reasonable best efforts to promptly (A) take or cause to be taken, all actions, and do, or cause to be done, all things, necessary proper or advisable to cause the conditions to closing set forth in the merger agreement to be satisfied as promptly as practicable, including preparing and filing promptly and fully all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents under applicable laws; and (ii) obtain, or cause to be obtained, all consents, authorizations, orders and approvals from, and make all filings with, all governmental authorities that may be or become necessary for its execution and delivery of the merger agreement and the performance of its obligations pursuant to the merger agreement. The Company will use its reasonable best efforts to obtain any consent, approval or waiver, or give any notice, with respect to material contracts listed in the Company disclosure letter. Each party shall cooperate fully with the other party and its affiliates in promptly seeking to obtain all such consents, authorizations, orders and approvals. Parent, Merger Sub and the Company shall not willfully take any action that will have the effect of delaying, impairing or impeding the receipt of any required consents, authorizations, orders and approvals.

 

These reasonable best efforts include taking certain steps to secure necessary consents, approvals, waivers and authorizations of governmental authorities and third parties. Notwithstanding anything in the merger agreement to the contrary, reasonable best efforts will not obligate the Parent, the Company, the surviving corporation or any other subsidiary of Parent or the Company to: (i) undertake or enter into agreements or agree to the entry of an order or decree with any governmental authority, (ii) commit to sell or dispose of, or hold separate or agree to sell or otherwise dispose of, assets, categories of assets or businesses of the Parent, the Company, the surviving corporation or any other subsidiary of Parent or the Company, (iii) commit to terminate, amend or replace any existing relationships and contractual rights and obligations of Parent, the Company, the surviving corporation or any other subsidiary of Parent or the Company, (iv) terminate any relevant venture or other arrangement of Parent, the Company, the surviving corporation or any other subsidiary of Parent or the Company or (v) effectuate any other change or restructuring of Parent, the Company, the surviving corporation or any other Subsidiary of Parent or the Company.

 

Financing of the Merger

 

Parent has represented and warranted to the Company that it has and will have the cash necessary to pay the amounts required to be paid by Parent pursuant to the merger agreement. The obligations of the Parent and Merger Sub are not subject to any condition with respect to Parent’s or Merger Sub’s ability to obtain financing for the merger.

 

Coordination on Litigation

 

The Company will promptly after it has notice of any of the following notify Parent of (i) any notice or other communication from any person alleging that the consent of such person is or may be required in connection with the transactions contemplated by the merger agreement, (ii) any notice or other communication from any governmental authority in connection with the transactions contemplated by the merger agreement and (iii) proceedings instituted or threatened against the Company or any of its directors, officers or affiliates, including by any holders of the shares of Asensus common stock, before any court or governmental authority, relating to or involving or otherwise affecting the Company or any of the Company’s subsidiaries that, if pending on the date of the merger agreement, would have been required to have been disclosed in accordance with the merger agreement or relating to the merger agreement or the transactions contemplated hereby, or seeking damages or discovery in connection with such transactions. The Company will consult with Parent with respect to the defense or settlement of any such proceedings, will consider Parent’s views with respect to such proceedings, and will not settle or materially stipulate with respect to any such Proceedings without Parent’s written consent (not to be unreasonably withheld, conditioned or delayed).

 

Other Covenants and Agreements

 

The merger agreement contains additional covenants, including, among others, covenants relating to the filing of this proxy statement, public announcements relating to the merger, elimination of any applicable takeover statutes, and exemptions of dispositions of our securities in connection with the merger under Rule 16b-3 of the Exchange Act.

 

 

Conditions to Completion of the Merger

 

The respective obligations of each party to effect the merger will be subject to the satisfaction or written waiver at or prior to effective time of the following conditions:

 

 

The merger agreement will have been duly adopted by stockholders of the Company constituting the majority of the outstanding shares of common stock on the record date, or the “Company Requisite Vote” in accordance with applicable law, the Certificate of Incorporation and the Bylaws at the special meeting.

 

 

No statute, rule or regulation will have been enacted, issued, enforced or promulgated and remain in effect by any governmental authority which prohibits the consummation of the merger, and there will be no order or injunction of a court of competent jurisdiction in effect prohibiting or making illegal the consummation of the merger.

 

The obligations of Parent and Merger Sub to effect the merger will be subject to the satisfaction or written waiver at or prior to the effective time of the following conditions:

 

 

No suit, action or proceeding by a governmental authority is pending in connection with the transactions contemplated by the merger agreement (1) seeking to prohibit or impose any material limitations on Parent’s or Merger Sub’s ownership or operation (or that of any of their respective subsidiaries or affiliates) of all or any material portion of their or the Company’s or any Company subsidiary’s businesses or assets, taken as a whole, or to compel Parent or Merger Sub or their respective subsidiaries or affiliates to dispose of or hold separate any material portion of the business or assets of the Company or Parent or their respective subsidiaries, (2) seeking to prohibit or make illegal the making or consummation of the merger or the performance of any of the other transactions contemplated by the Agreement, (3) seeking to impose material limitations on the ability of Merger Sub or Parent effectively to exercise full rights of ownership of the shares of the Company’s common stock or (4) seeking to require divestiture by Parent or any of its subsidiaries or affiliates of any shares of the Company’s common stock.

 

 

Each of (i) the representations and warranties of the Company contained in the merger agreement, other than those set forth in Section 3.1, Section 3.2(b)-(f), Section 3.3, Section 3.4(a)(i) and Section 3.25, are true and correct, without giving effect to the words “materially” or “material” or to any qualification based on the defined term “Company Material Adverse Effect”, as of the date of the merger agreement and as of the effective time as if made as of such date (except for those representations and warranties which address matters only as of an earlier date, which shall have been true and correct as of such earlier date), except where the failure to be so true and correct has not had, or would not reasonably be expected to have, a Company Material Adverse Effect; (ii) the representations and warranties of the Company contained in Section 3.1, Section 3.2(b)-(f), Section 3.3, Section 3.4(a)(i) and Section 3.25 are true and correct in all material respects as of the date of the merger agreement and as of the effective time as if made as of such date (except for those representations and warranties which address matters only as of an earlier date, which shall have been true and correct as of such earlier date); and (iii) the representations and warranties of the Company contained in Section 3.2(a) are true and correct in all respects, as of the date of the merger agreement and as of the effective time as if made as of such date (except for those representations and warranties which address matters only as of an earlier date, which shall have been true and correct as of such earlier date), subject only to de minimis deviations.

 

 

The Company will have performed and complied with, in all material respects, its agreements, obligations and covenants required to be performed by it under the merger agreement at or prior to the effective time.

 

 

Since the date of the merger agreement, there shall not have occurred any Company Material Adverse Effect that is continuing.

 

 

The Company will have furnished Parent with a certificate dated as of the closing date signed on its behalf by its Chief Executive Officer or Chief Financial Officer to the effect that the conditions set forth above have been satisfied.

 

 

The obligations of the Company to effect the merger will be subject to the satisfaction or written waiver at or prior to the effective time of the following conditions:

 

 

Each of (i) the representations and warranties of Parent and Merger Sub contained in Section 4.1 and Section 4.2 are true and correct in all material respects as of the date of the merger agreement and as of the effective time as if made as of such date (except for those representations and warranties which address matters only as of an earlier date which shall have been true and correct as of such earlier date); and (ii) each of the other representations and warranties of Parent and Merger Sub contained in SECTION 4 of the merger agreement are true and correct, without giving effect to the words “materially” or “material” or to any qualification based on the defined term “Parent Material Adverse Effect,” as of the date of the merger agreement and as of the effective time as if made as of such date (except for those representations and warranties which address matters only as of an earlier date which shall have been true and correct as of such earlier date), except where the failure to be so true and correct has not had, or would not reasonably be expected to have, a Parent Material Adverse Effect.

 

 

Each of Parent and Merger Sub will have performed in all material respects the covenants and obligations required to be performed by it under the merger agreement at or prior to the effective time.

 

 

Parent and Merger Sub will have furnished the Company with a certificate dated as of the Closing Date signed on its behalf by a duly appointed officer or other authorized signatory of Parent and Merger Sub, respectively, to the effect that the conditions set forth above have been satisfied.

 

No party to the merger agreement may rely on the failure of any condition to be satisfied if such failure was caused by such party’s failure to act in good faith or use its reasonable best efforts to consummate the transactions contemplated hereby.

 

Termination

 

The merger agreement may be terminated and the transactions contemplated hereby may be abandoned at any time prior to the effective time, whether before or after the Company Requisite Vote is obtained:

 

 

by mutual written consent of Parent and the Company;

 

 

by either Parent or the Company:

 

 

o

(A) if a court of competent jurisdiction or other governmental authority has issued an order or ruling or taken any other action, and such order, decree or ruling or other action has become final and non-appealable, or (B) there exists any statute, rule or regulation, in each case of the foregoing clauses (A) and (B), permanently restraining, enjoining or otherwise prohibiting the consummation of the merger; provided, however, that the right to terminate the merger agreement under this clause will not be available to any party whose action or failure to fulfill any obligation under the merger agreement has been the principal cause of such restraint or the failure to remove such restraint;

 

 

o

on or after October 30, 2024 if the effective time has not occurred prior to such date; provided, that, such date may be extended by mutual consent in a written instrument duly executed by each of the Company and the Parent; provided further, however, that the right to terminate the merger agreement in accordance with this termination right will not be available to any party whose action or failure to fulfill any obligation under the merger agreement has been the principal cause of the failure of the effective time to occur by such date; or  

 

 

o

if the Company Requisite Vote shall not have been obtained at the special meeting duly convened therefor or at any adjournment or postponement thereof; provided, however, that the right to terminate the merger agreement in accordance with this termination right will not be available to any party whose material breach of the merger agreement has been the principal cause of, or resulted in, the failure to obtain the Company Requisite Vote.

 

 

 

by Parent or the Merger Sub:

 

 

o

if there has been a breach by the Company of, or inaccuracy in, any representation, warranty, covenant or agreement of the Company set forth in the merger agreement such that a condition set forth in Section 7.2(b) or Section 7.2(c) of the merger agreement would not be then satisfied measured as of the time Parent asserts this right of termination (and any such breach has not been cured within twenty (20) days following notice by Parent thereof or such breach is not reasonably capable of being cured); provided, that Parent and Merger Sub shall not be entitled to terminate the merger agreement under this termination right if Parent or Merger Sub is then in breach of any representation, warranty, covenant or agreement, which breach would result in a failure of a closing condition applicable to the Parent as described above; or

 

 

o

if at any time prior to the special meeting, (A) the Company Board of Directors has effected a Company Adverse Recommendation Change or (B) the Company has materially breached its “no solicitation” obligations under the merger agreement and has not cured such breach (to the extent such breach is curable) within five (5) business days of receipt of a notice of such breach from Parent.

 

 

by the Company:

 

 

o

if, prior to the effective time, there has been a breach by Parent or Merger Sub of, or any inaccuracy in, any representation, warranty, covenant or other agreement of Parent or Merger Sub set forth in the merger agreement such that a condition set forth in Section 7.3(a) or 7.3(b) of the merger agreement would be then satisfied, measured as of the time the Company asserts this right of termination (and such breach or inaccuracy has not been cured within twenty (20) days following notice by the Company thereof or such breach or inaccuracy is not reasonably capable of being cured); provided, that the Company shall not be entitled to terminate the merger agreement under this termination right if the Company is then in breach of any representation, warranty, covenant or agreement, which breach would result in a failure of a closing condition applicable to the Company as described above; or

 

 

o

at any time prior to the receipt of the Company Requisite Vote at the special meeting, in order to accept a Superior Proposal; provided, however, that the Company (i) has not materially breached any of its obligations under the “no solicitation” obligations under the merger agreement and (ii) has paid the termination fee.

 

Any termination of the merger agreement as described above will be effective immediately upon the delivery of a written notice of the terminating party to the other party and, if then due, payment of the termination fee.  If the merger agreement is terminated in accordance with one of these termination rights, the merger agreement will become null and void and be of no further force or effect and there will be no liability on the part of Parent, Merger Sub or the Company (or any of their respective directors, officers, employees, stockholders, agents or Representatives), except for the parties obligations under a confidentiality agreement, and the obligations set forth in the “Termination” and “Miscellaneous” sections of the merger agreement; provided, however, that nothing in the merger agreement will relieve any party from liability for fraud or intentional or willful breach of any of its representations, warranties, covenants or agreements set forth in the merger agreement.

 

If Parent terminates the merger agreement in accordance with Section 8.1(c)(ii)(A) of the merger agreement, the Company will promptly pay Parent a termination fee of $3,600,000 in cash, but in no event later than two (2) business days after the date of receipt of Parent’s termination notice.  If the Company terminates the merger agreement in accordance with Section 8.1(d)(ii), it will, in connection with and as a condition to such termination, pay Parent the termination fee.  If (i) Parent or the Company, as applicable, terminates the merger agreement in accordance with Section 8.1(b)(ii), Section 8.1(b)(iii) or Section 8.1(c)(i) of the merger agreement, (ii) prior to such time, a Company Acquisition Proposal has been made or publicly announced and not subsequently publicly withdrawn, and (iii) within twelve (12) months after the date on which the merger agreement shall have been terminated the Company enters into a definitive agreement with respect to a Company Acquisition Proposal or a Company Acquisition Proposal is consummated, then the Company will pay Parent the termination fee upon signing a definitive agreement for a transaction relating to a Company Acquisition Proposal (or, if earlier, the consummation of a transaction contemplated by a Company Acquisition Proposal).  For the avoidance of doubt, no termination fee shall be due to Parent if Parent or the Company, as applicable, terminates the Agreement in accordance with Section 8.1(b)(ii), Section 8.1(b)(iii) or Section 8.1(c)(i) of the merger agreement if a Company Acquisition Proposal has not been made or publicly announced prior to any such termination. All amounts due hereunder will be payable by wire transfer in immediately available funds to such account as Parent may designate in writing to the Company.  If the Company fails to promptly make any termination fee payment required, the Company will indemnify Parent for its fees and expenses (including attorneys’ fees and expenses) incurred in connection with pursuing such payment and will pay interest on the amount of the payment at the prime rate of Bank of America (or its successors or assigns) in effect on the date the payment was payable.

 

 

Miscellaneous

 

Fees and Expenses

 

All fees, costs and expenses incurred in connection with the merger agreement and the transactions contemplated hereby will be paid by the party incurring such expenses whether or not the merger is consummated.

 

Amendment

 

The merger agreement may be amended, modified and supplemented, by written agreement of the parties.  The merger agreement may not be amended except by an instrument in writing signed on behalf of each of the parties.

 

Waiver

 

At any time prior to the effective time, either party may (a) extend the time for the performance of any of the obligations or other acts of the other party or (b) waive compliance with any of the agreements of the other party or any conditions to its own obligations, in each case, only to the extent such obligations, agreements and conditions are intended for its benefit; provided, however, that any such extension or waiver will be binding upon a party only if such extension or waiver is set forth in a writing executed by such party.

 

Survival of Representations and Warranties

 

None of the representations and warranties contained in the merger agreement will survive the effective time.

 

Entire Agreement

 

The merger agreement (including the Company’s disclosure letter, annexes and exhibits and the documents and instruments referenced in the merger agreement) and the Note contain the entire agreement among the parties with respect to the merger and related transactions, and supersede all prior agreements, written or oral, among the parties with respect thereto, other than the confidentiality agreement, which will survive and remain in full force and effect (other than the “standstill” provisions which will expire concurrently with the execution and delivery of the merger agreement).

 

Governing Law

 

The merger agreement and all actions arising under or in connection therewith will be governed by and construed in accordance with the laws of the State of Delaware, regardless of any other the laws that might otherwise govern under applicable principles of conflicts of law.

 

Assignment

 

The merger agreement will not be assigned by any of the parties (whether by operation of law or otherwise) without the prior written consent of the other parties, except that (i) Merger Sub may assign, in its sole discretion and without the consent of any other party, any or all of its rights, interests and obligations hereunder to (A) Parent, (B) to Parent and one or more direct or indirect wholly owned Subsidiaries of Parent or (C) to one or more direct or indirect wholly owned Subsidiaries of Parent and (ii) Parent may assign, in its sole discretion and without the consent of any other party, any or all of its rights, interests and obligations hereunder to KARL STORZ one or more of its controlled affiliates; any such assignee may thereafter assign, in its sole discretion and without the consent of any other party, any or all of its rights, interests and obligations hereunder to one or more additional authorized assignees; provided, however, that in connection with any assignment, Parent and Merger Sub (or the assignor) will remain liable for the performance by Parent and Merger Sub (and such assignor, if applicable), as applicable, of their obligations hereunder.  Subject to the preceding sentence, but without relieving any party of any obligation hereunder, the merger agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.

 

 

Severability

 

If any provision of the merger agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of the merger agreement will remain in full force and effect.  Any provision of the merger agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.  The parties will replace such invalid or unenforceable provision of the merger agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid or unenforceable provision.

 

Jurisdiction

 

Each of the Company, Parent and Merger Sub irrevocably agrees that any legal action or proceeding with respect to the merger agreement or the transactions contemplated hereby or for recognition and enforcement of any judgment in respect hereof brought by the other party or its successors or assigns shall be brought and determined in the Court of Chancery in the State of Delaware and, if such court declines jurisdiction, any other state court of the State of Delaware or the United States District Court for the District of Delaware, and each of the Company, Parent and Merger Sub hereby irrevocably submits with respect to any action or proceeding for itself and in respect to its property, generally and unconditionally, to the exclusive jurisdiction of the aforesaid courts.  Each of the Company, Parent and Merger Sub hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to the merger agreement, (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to lawfully serve process, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), or (c) to the fullest extent permitted by law, that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) the merger agreement, or the subject matter hereof, is not enforceable in or by such courts.

 

Specific Performance

 

The parties acknowledge and agree that, in the event of any breach of the merger agreement, irreparable harm would occur that monetary damages could not make whole.  It is accordingly agreed that (i) each party will be entitled, in addition to any other remedy to which it may be entitled at law or in equity, to compel specific performance to prevent or restrain breaches or threatened breaches of the merger agreement in any action without the posting of a bond or undertaking and (ii) the parties will, and hereby do, waive, in any action for specific performance, the defense of adequacy of a remedy at law and any other objections to specific performance of the merger agreement. Notwithstanding the parties’ rights to specific performance, each party may pursue any other remedy available to it at law or in equity, including monetary damages.

 

No Waiver

 

No failure or delay by any party in the exercise of any right hereunder will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor will any single or partial exercise of any such right preclude other or further exercise thereof or of any other right.  All rights and remedies existing under the merger agreement are cumulative to, and not exclusive to, and not exclusive of, any rights or remedies otherwise available.

 

 

Waiver of Jury Trial

 

EACH OF PARENT, COMPANY AND MERGER SUB HEREBY IRREVOCABLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, UNDER OR IN CONNECTION WITH THE MERGER AGREEMENT OR ANY RELATED DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS, STATEMENT OR ACTION RELATED HERETO OR THERETO.

 

 

THE MERGER PROPOSAL
(PROPOSAL #1)

 

The information below regarding the merger proposal should be read together with the rest of this proxy statement, especially The Special Meeting on page 19, The Merger on page 23, The Merger Agreement on page 56, and the copy of the merger agreement attached as Appendix A.

 

Vote on Approval of the Merger Agreement

 

We are asking you to approve a proposal to adopt the merger agreement, and by so doing approve the merger and other transactions contemplated thereby. A copy of the merger agreement is attached as Appendix A. For a discussion of the terms and conditions of the merger agreement, see the section entitled “The Merger Agreement” beginning on page 56. For a discussion of other considerations related to the merger, see the section entitled “The Merger” beginning on page 23.

 

Vote Required for Approval

 

To be approved, the merger proposal must receive the affirmative vote of holders of at least                         shares of our common stock, which represents a majority of all shares of our common stock issued and outstanding and entitled to vote as of the record date.

 

Abstentions, shares not voted and broker non-votes, if any, will all have the effect of a vote “AGAINST” the merger proposal.

 

Board Recommendation

 

The disinterested members of our Board unanimously recommends that you vote “FOR approval of the merger proposal. For a summary of the reasons for our Board’s recommendation, see “The Merger Reasons for Our Boards Recommendation in Favor of the Merger” beginning on page 35.

 

 

THE MERGER-RELATED COMPENSATION PROPOSAL
(PROPOSAL #2)

 

The information below regarding the merger-related compensation proposal should be read together with the rest of this proxy statement, particularly The Special Meeting on page 19 and The Merger Interests of Our Directors and Executive Officers in the Merger on page 44.

 

Non-Binding Advisory Vote on Merger Related Compensation to Our Named Executive Officers

 

As required by Section 14A of the Exchange Act and the applicable SEC rules issued thereunder, we are providing our stockholders with an opportunity to cast a non-binding advisory vote on certain compensation that may be paid or become payable to our named executive officers in connection with the merger, as described in the table entitled “Quantification of Payments and Benefits to Our Named Executive Officers,” in the section entitled “The Merger Interests of Our Directors and Executive Officers in the Merger,” including the footnotes to the table and related narrative discussion.

 

The disinterested members of our Board unanimously recommends that our stockholders approve the following resolution:

 

RESOLVED, that the stockholders approve, on a nonbinding, advisory basis, the compensation that may be paid or become payable to our named executive officers in connection with the merger, including the agreements and understandings pursuant to which such compensation may be paid or become payable, as disclosed in our proxy statement for the special meeting.

 

The vote on the merger-related compensation proposal is a vote separate and apart from the vote on the merger proposal. Accordingly, you may vote to approve the merger proposal and vote not to approve the merger-related compensation proposal and vice versa.

 

Approval of this proposal is not a condition to the completion of the merger, and the vote with respect to this proposal is advisory only and will not be binding on the Company or Parent. Accordingly, regardless of the outcome of the non-binding, advisory vote, if the merger proposal is approved and the merger is completed, the merger-related compensation, if applicable, will be paid to our named executive officers in accordance with the terms of their compensation agreements and arrangements.

 

Vote Required for Approval

 

The merger-related compensation proposal is a non-binding advisory vote. To be approved, the merger- related compensation proposal must receive the affirmative vote of a majority of all shares of our common stock represented at the special meeting, in person or by proxy, and entitled to vote at the special meeting.

 

Abstentions will have the same effect as a vote against the merger-related compensation proposal. Assuming a quorum is present, any broker non-vote will have no effect on the merger-related compensation proposal.

 

Board Recommendation

 

The disinterested members of our Board unanimously recommends that you vote “FOR approval of the merger-related compensation proposal.

 

 

THE ADJOURNMENT PROPOSAL
(PROPOSAL #3)

 

The information below regarding the adjournment proposal should be read together with the rest of this proxy statement, particularly The Special Meeting Adjournment on page 19.

 

Vote on Adjournment of the Special Meeting to a Later Date or Dates

 

We are asking our stockholders to approve adjournment of the special meeting, if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger agreement at the time of the special meeting.

 

If our stockholders approve the adjournment proposal, we may adjourn the special meeting and any adjourned session of the special meeting and use the additional time to solicit additional proxies to obtain a quorum for the special meeting. We may also use the additional time to solicit proxies from stockholders that have previously returned proxies voting against the merger proposal. Among other things, approval of the adjournment proposal could mean that, even if we had received proxies representing a sufficient number of votes against the merger proposal such that the merger proposal would be defeated, we could adjourn the special meeting without a vote on the merger proposal and seek to convince the holders of those shares to change their votes to votes in favor of the merger proposal.

 

We do not anticipate calling a vote on the adjournment proposal if the merger proposal is approved by the requisite number of shares of common stock at the special meeting.

 

Vote Required for Approval

 

For the adjournment proposal to be approved, the proposal must receive the affirmative vote of the holders of a majority of the shares of common stock represented at the special meeting, in person or by proxy, and entitled to vote on this proposal. A quorum may, but need not, be present.

 

The vote on the adjournment proposal is a vote separate and apart from the vote on the merger proposal. Accordingly, you may vote to approve the merger proposal and vote not to approve the adjournment proposal and vice versa.

 

An abstention will have the effect of a vote against the adjournment proposal, but any broker non-vote will have no effect on the adjournment proposal, provided that a quorum is otherwise present.

 

Board Recommendation

 

The disinterested members of our Board unanimously recommends that you vote “FOR approval of the adjournment proposal. In making its recommendation, our Board considered a variety of factors including:

 

 

In certain circumstances, an adjournment of the special meeting may be the most efficient way to obtain the stockholder approval necessary for the consummation of the merger, which our Board believes is in the best interests of our company and our stockholders, as described under “Reasons for Our Boards Recommendation in Favor of the Merger” beginning on page 35;

 

 

If a quorum is not present at the meeting for logistical or other reasons, the adjournment proposal could allow us to postpone the votes on the merger proposal and merger-related compensation proposal without needing to incur the costs or delay associated with calling another, separate special meeting; and

 

 

If defeat of the merger proposal appears likely, an adjournment could be used to ensure that our stockholders have had an adequate opportunity to consider the consequences of the vote, particularly given the adverse effects that defeat of the merger proposal could have on our company, including as described under “Asensus Without the Merger” beginning on page 23.

 

 

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information concerning the beneficial ownership of common stock by: (i) each person known by us to be the beneficial owner of more than 5% of our outstanding common stock currently; (ii) each of our current directors (iii) each of our current named executive officers; and (iv) all of our executive officers and directors as a group. Ownership information is set forth as of        , 2024. Unless otherwise noted, each of the following disclaims any beneficial ownership of the shares, except to the extent of his, her or its pecuniary interest, if any, in such shares. Unless otherwise indicated, the mailing address of each individual is c/o Asensus Surgical, Inc., 1 TW Alexander Drive, Suite 160, Durham, North Carolina 27703.

 

As of        , 2024

 

Name and Address of Beneficial Owner

 

Number of Shares of
Common Stock (1)

   

Percentage of
Outstanding
Common
Shares (2)

 

Directors and Executive Officers

               

David B. Milne (3)

    920,407       *  
Anthony Fernando (4)     4,152,669         %

Andrea Biffi (5)

    2,357,640       *  

Kevin Hobert (6)

    165,289       *  

Elizabeth Kwo, M.D. (7)

    172,541       *  

Richard C. Pfenniger, Jr. (8)

    233,334       *  

William N. Starling (9)

    243,608       *  

Shameze Rampertab (10)

    846,035       *  
All Directors and Executive Officers as a group (8 persons) (11)     9,091,523         %

 


* Holds less than 1%

 

(1)

A person is deemed to be the beneficial owner of shares of common stock underlying Company Options, Company RSUs or warrants held by that person that are exercisable or vested as of        , 2024 or that will become exercisable or vested within 60 days thereafter.

(2)

Based on                shares of common stock outstanding as of        , 2024. Each beneficial owner’s percentage ownership is determined assuming that Company Options, Company RSUs, Company PRSUs and warrants that are held by such person (but not those held by any other person) and that are exercisable or vested as of        , 2024, or that will become exercisable or vested within 60 days thereafter, have been exercised or vested into common stock. The additional shares resulting from such exercise or vesting are included in both the numerator and denominator for such beneficial owner for purposes of their calculation.

(3)

Consists of 619,884 shares of common stock directly owned by Mr. Milne, vested Company Options to purchase 153,465 shares of common stock and exercisable warrants to purchase 147,058 shares of common stock.

(4)

Consists of 2,198,903 shares of common stock directly owned by Mr. Fernando and 1,953,766 vested Company Options.

(5)

Consists of 492,815 shares of common stock directly owned by Mr. Biffi and Company Options to purchase 382,817 shares of common stock. Mr. Biffi is the sole director and Chief Executive Officer of Three Heads Investment S.R.L., which owns 1,482,008 shares of common stock. Mr. Biffi disclaims ownership of the shares held by Three Heads Investment S.R.L., except for his pecuniary interest therein.

(6)

Consists of 36,134 shares of common stock directly owned by Mr. Hobert, 18,067 shares underlying Unvested RSUs and Company Options to purchase 111,088 shares of common stock.

(7)

Consists of 99,134 shares of common stock directly owned by Dr. Kwo, 18,067 shares underlying Unvested RSUs and Company Options to purchase 55,340 shares of common stock.

(8)

Consists of 189,417 shares of common stock directly owned by Mr. Pfenniger and Company Options to purchase 43,917 shares of common stock.

(9)

Consists of 13,846 shares of common stock directly owned by Mr. Starling and Company Options to purchase 190,628 shares of common stock. Also includes 39,134 shares held by W. Starling and D. Starling, Trustees of the Starling Family Trust, UDT August 15, 1990.

 

 

(10)

Consists of 416,288 shares of common stock directly owned by Mr. Rampertab and vested Company Options to purchase 429,747 shares of common stock.

(11)

Includes Company Options to purchase 3,320,768 shares of common stock, Unvested RSUs to acquire 36,134 shares of common stock and warrants to purchase 147,058 shares of common stock.

 

The Company is not aware of any arrangements with any of the foregoing stockholders or any other stockholder of the Company that may result in a change in control of the Company.

 

Securities Authorized for Issuance Under Equity Compensation Plans 

 

The Company currently has one equity compensation plan under which it makes awards, the Amended & Restated Incentive Plan, or the Plan. The Plan was originally approved by the Asensus Board and adopted by the majority of stockholders on November 13, 2007. The Plan was subsequently amended, approved by the Asensus Board, and approved by stockholders as follows:

 

No.

 

Amendment Purpose

Date of

Stockholders’ approval

1  

Increase the number of shares of common stock authorized under the Plan to 918,462 shares, and to make other changes

May 7, 2015

2  

Increase the number of shares reserved for issuance under the Plan to 1,456,923 shares, and to make other changes

June 8, 2016

3  

Increase the number of shares reserved for issuance under the Plan to 1,995,385 shares

May 25, 2017

4  

Increase the number of shares reserved for issuance under the Plan to 3,149,231 shares

May 24, 2018

5  

Increase the number of shares reserved for issuance under the Plan to 4,072,308 shares, and to make other changes

April 24, 2019

6  

Increase the number of shares reserved for issuance under the Plan to 10,072,307 shares, and to make other changes

June 8, 2020

7  

Increase the number of shares reserved for issuance under the Plan to 32,072,307 shares.

July 22, 2021

8  

Increase the number of shares reserved for issuance under the Plan to 54,072,307 shares

June 6, 2023

 

The Plan was used for plan-based awards for officers, other employees, consultants, advisors and non-employee directors. The following table gives information about the Company’s common stock that may be issued upon the exercise of Company Options and other equity awards as of December 31, 2023:

 

 

Plan Category

 

Number of
securities to be
issued upon
exercise of
outstanding
Company Options

and

other

equity

awards (1)

   

Weighted
average

exercise
price of
outstanding
Company

Options

   

Number of
securities
remaining
available
for future
issuance

 

Equity compensation plans approved by security holders

    22,620,856       3.24       22,185,899  

Equity compensation plans not approved by security holders (2)

    150,000       0.42       0  

Total

    22,770,856               22,185,899  

 


(1)

Includes 10,294,679 shares underlying outstanding Company Options awarded under the Plan and 12,326,177 restricted stock units awarded under the Plan.

(2)

Represents 150,000 shares underlying outstanding Company Options issued as an employment inducement grant as an exception to the NYSE American stockholder approval rules.

 

THE MARKET FOR OUR COMMON STOCK

 

Our common stock has been publicly traded since April 2, 2014, and is now traded on the NYSE American, under the symbol “ASXC.”

 

As of        , 2024, there were                  shares of Asensus common stock outstanding and the number of stockholders of record of the Company was      . We estimate that the number of beneficial owners as of that date was approximately          . We have never declared or paid any cash dividends on our common stock.

 

On        , 2024, the latest practicable trading day before the printing of this proxy statement, the closing price for our common stock on NYSE American was $      per share. You are encouraged to obtain current market quotations for our common stock.

 

Following the merger, there will be no further market for our common stock. In particular, if the merger is completed:

 

 

Our stock will be delisted from NYSE American and deregistered under the Exchange Act;

 

 

We will no longer file periodic reports with the SEC;

 

 

Our stock transfer books will be closed when the merger closes, and there will be no further registration of share transfers on our stock transfer books; and

 

 

All shares of our common stock outstanding prior to the effective time of the merger will be automatically cancelled and converted into the right to receive the merger consideration, subject, however to rights of dissenting stockholders to receive “fair value” following proper exercise of appraisal rights (described above under “The Merger  Appraisal Rights” beginning on page 51).

 

 

MISCELLANEOUS

 

Receiving the Merger Consideration

 

If the merger is completed, the paying agent will send information to our stockholders of record explaining how to exchange shares of our common stock for the merger consideration. You should not send in your Asensus stock certificates before you receive these transmittal materials. If your shares of our common stock are held in “street name” by your broker, bank or other nominee, you may receive instructions from your broker, bank or other nominee as to what action, if any, you need to take to receive the merger consideration. Do not send in your certificates now.

 

Householding

 

We may deliver just one proxy statement to two or more stockholders who share an address, unless we have received contrary instructions from one or more of the stockholders. Each stockholder will receive a separate proxy card. This practice, which is commonly referred to as “householding,” is permitted by Rule 14a-3(e)(1) under the Exchange Act and helps to reduce costs, clutter and paper waste for the company and our stockholders.

 

We will, however, promptly deliver a separate copy if requested by any stockholder at a shared address subject to householding. Requests for additional copies of this proxy statement should be directed to our proxy solicitor, Alliance Advisors, by telephone at (844) 858-7383 or by mail at 200 Broadacres Drive, 3rd Floor Bloomfield, NJ 07003.

 

In addition, stockholders who share a single address, but receive multiple copies of the proxy statement, may request that in the future they receive a single copy of any future proxy materials by contacting us at 1 TW Alexander Drive, Suite 160, Durham, North Carolina 27003, Attention: Corporate Secretary of Asensus (if your shares are registered in your own name) or your bank, broker or other nominee (if your shares are registered in their name).

 

Stockholder Proposals for Our 2024 Annual Meeting, if needed

 

If the merger is completed, we will have no public stockholders and there will be no public participation in any future meetings of our stockholders. However, if the merger is not completed, our stockholders will continue to be entitled to attend and participate in our stockholders’ meetings.

 

We will hold a 2024 annual meeting of stockholders only if the merger has not already been completed. Pursuant to Rule 14a-8 under the Exchange Act, some stockholder proposals may be eligible for inclusion in our 2024 annual meeting proxy statement. These stockholder proposals must be submitted, along with proof of ownership of our stock in accordance with Rule 14a-8(b)(2), to our principal executive offices, in care of our Corporate Secretary, at the address set forth on the first page of this proxy statement. Failure to deliver a proposal in accordance with this procedure may result in the proposal not being deemed timely received. If we need to hold an annual meeting of stockholders in 2024, we will file a Current Report on Form 8-K with the SEC to set forth the deadlines for any stockholder proposals or nominations for director candidates in conjunction with such 2024 annual meeting.

 

Legal And Cautionary Disclosures

 

No Determination by Securities Regulators

 

Neither the SEC nor any state securities regulatory agency has approved or disapproved of the transactions described in this proxy statement, including the merger, or determined if the information contained in this proxy statement is accurate or adequate. Any representation to the contrary is a criminal offense.

 

No Solicitation Where Prohibited

 

This proxy statement does not constitute the solicitation of a proxy in any jurisdiction to or from any person to whom or from whom it is unlawful to make such proxy solicitation in that jurisdiction.

 

 

Sources of Information

 

We have supplied all information relating to the Company. Parent has supplied, and we have not independently verified, all of the information relating to Parent and Merger Sub.

 

Other Information Not Authorized by Asensus

 

We have not authorized anyone to provide any information other than that which is contained or incorporated by reference in this proxy statement. We have not authorized any other person to provide you with different or additional information and we take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Further, you should not assume that the information contained or incorporated by reference in this proxy statement, or in any document incorporated by reference is accurate as of any date other than the respective dates thereof.

 

For your convenience, we have included certain website addresses and other contact information in this proxy statement. However, information obtained from those websites or contacts is not part of this proxy statement (except for any particular documents specifically incorporated by reference into this proxy statement, as set forth under “Where You Can Find More Information Incorporation by Reference” on page 84).

 

Subsequent Developments

 

This proxy statement is dated        , 2024. You should not assume that the information contained in this proxy statement is accurate as of any date other than that date, and the mailing of this proxy statement to stockholders does not and will not create any implication to the contrary. Our business, financial condition, results of operations and prospects may have changed since those dates.

 

We may (and in certain limited circumstances may be legally required to) update this proxy statement prior to the special meeting, including by filing documents with the SEC for incorporation by reference into this proxy statement without delivering them to our stockholders. Therefore, you should monitor and review our SEC filings until the special meeting is completed. However, although we may update this proxy statement, we undertake no duty to do so except as otherwise expressly required by law.

 

Context for Assertions Embodied in Agreements

 

The merger agreement and other agreements are being included or incorporated by reference into this proxy statement only to provide our stockholders with information regarding their respective terms, and not to provide investors with any other factual information regarding the parties, their affiliates, or their respective businesses. In particular, you should not rely on the assertions embodied in the representations, warranties, and covenants contained in these agreements, or any descriptions of them, as characterizations of any actual state of facts. The representations, warranties, and covenants in each of these agreements (1) were made only for purposes of that agreement and solely for the benefit of the parties to that agreement (and not for the benefit of our stockholders), (2) were made only as of specified dates and do not reflect subsequent information, (3) are subject to limitations agreed upon by the parties to such agreement, including in certain cases being subject to confidential disclosure schedules that modify, qualify, and create exceptions to such representations, warranties, and covenants, (4) may also be subject to a contractual standard of materiality different from that generally applicable under federal securities laws, and (5) have been made for the purposes of allocating contractual risk between the Company, Parent and Merger Sub instead of establishing matters of fact. Stockholders are not third-party beneficiaries under the merger agreement and should not rely on the representations, warranties, covenants and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of the Company, Parent or Merger Sub or any of their respective affiliates or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the merger agreement. In addition, you should not rely on the covenants in the merger agreement as actual limitations on the respective businesses of the Company, Parent and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential disclosure schedule to the merger agreement or as otherwise consented to by the appropriate party, which consent may be given without prior notice to the public.

 

 

Forward-Looking Statements

 

This proxy statement contains a variety of forward-looking statements, which are subject to a number of risks and uncertainties. We caution you not to place undue reliance on forward-looking statements. See “Preface Forward-Looking Statements” on page 1.

 

 

WHERE YOU CAN FIND MORE INFORMATION

 

Incorporation by Reference

 

The SEC allows us to “incorporate by reference” into this document the information we file with the SEC. This means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be a part of this document, and later information that we file with the SEC will update and supersede that information. Information in documents that is deemed, in accordance with SEC rules, to be furnished and not filed will not be deemed to be incorporated by reference into this document. These documents contain important information about the Company and our financial condition.

 

We incorporate by reference (1) the documents listed below and (2) any documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act from the date of this document to the date of the special meeting (including any adjournment or postponement thereof). We are not, however, incorporating by reference any documents or portions thereof that are not deemed “filed” with the SEC, including any information furnished pursuant to Items 2.01 or 7.01 of Form 8-K.

 

 

Our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 21, 2024, as amended by the Form 10-K/A filed with the SEC on April 29, 2024;

 

 

Our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 14, 2024; and

 

 

Our Current Reports on Form 8-K filed with the SEC on January 4, 2024 (Items 8.01 and 9.01), April 3, 2024 (Items 1.01, 2.03, 3.03, 8.01 and 9.01), May 15, 2024 (Item 5.08), and June 7, 2024 (Items 1.01, 8.01 and 9.01).

 

The documents incorporated by reference into this proxy statement are available to you as described below under “Obtaining Copies.”

 

Obtaining Copies

 

Obtaining Copies from the SEC

 

We file annual, quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public through the internet at the SEC’s web site at www.sec.gov.

 

Obtaining Copies from Asensus

 

We also make available a copy of our SEC reports, without charge, on the investor portion of our website at www.asensus.com as soon as reasonably practicable after we file the reports electronically with the SEC. The information included on our website is not incorporated by reference into this proxy statement.

 

In addition, you may obtain a copy of the reports, without charge, by writing or telephoning us at: Asensus Surgical, Inc., 1 TW Alexander Drive, Suite 160, Durham, North Carolina 27703, Attn: Corporate Secretary. In order to ensure timely delivery of such documents before the special meeting, any such request should be made promptly to us and in any event no later than , 2024. We undertake to send any information so requested (other than exhibits to incorporated documents that are not themselves specifically incorporated by reference into such document) by first class mail or another equally prompt means within one business day of receiving your request.

 

 

 

Appendix A

 

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

KARL STORZ ENDOSCOPY AMERICA, Inc.

 

KARL STORZ CALIFORNIA INC.

 

and

 

ASENSUS SURGICAL, INC.

 

Dated as of June 6, 2024

 

 

Table of Contents

Page
Number

 

SECTION 1 - THE MERGER

1

1.1.

The Merger

1

1.2.

Effective Time

2

1.3.

The Closing

2

1.4.

Directors and Officers of the Surviving Corporation

2

1.5.

Subsequent Actions

3

SECTION 2 - CONVERSION OF SECURITIES

3

2.1.

Conversion of Capital Stock

3

2.2.

Exchange of Certificates

3

2.3.

Dissenting Shares

5

2.4.

Company Incentive Plans

6

2.5.

Withholding

8

SECTION 3 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY

9

3.1.

Organization; Qualification

9

3.2.

Capitalization; Subsidiaries

9

3.3.

Authority Relative to Agreement

12

3.4.

No Conflict; Required Filings and Consents

13

3.5.

Company SEC Documents; Financial Statements

14

3.6.

Absence of Certain Changes or Events

16

3.7.

No Undisclosed Liabilities

16

3.8.

Litigation

16

3.9.

Product Liability

17

3.10.

Permits; Compliance with Laws

17

3.11.

Employee Benefit Plans

18

3.12.

Labor Matters

20

3.13.

Taxes

22

3.14.

Material Contracts

24

3.15.

Intellectual Property

26

3.16.

Real and Personal Property

31

3.17.

Environmental

32

 

 

Table of Contents

 

3.18.

Customers and Suppliers

33

3.19.

Foreign Corrupt Practices Act; Anti-Corruption; Sanctions

33

3.20.

Regulatory Compliance

34

3.21.

Data Privacy and Information Security

37

3.22.

Insurance

38

3.23.

Takeover Statutes

39

3.24.

No TID U.S. Business

39

3.25.

Brokers

39

3.26.

Opinion of the Company’s Financial Advisor

39

3.27.

Interested Party Transactions

39

3.28.

Information in the Proxy Statement

39

SECTION 4 - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

40

4.1.

Organization; Qualification

40

4.2.

Authority; Binding Nature of Agreement.

40

4.3.

No Conflict; Required Filings and Consents

40

4.4.

Litigation

41

4.5.

Brokers

41

4.6.

Sufficient Funds

41

4.7.

Merger Sub

41

4.8.

No Interested Stockholder

42

4.9.

No Other Representations or Warranties

42

SECTION 5 - COVENANTS AND OTHER AGREEMENTS

42

5.1.

Conduct of Business by the Company Pending the Merger

42

5.2.

No Solicitation

46

5.3.

Proxy Statement

50

5.4.

Stockholders Meeting

50

5.5.

Merger Sub

51

5.6.

Rule 16b-3 Matters

51

5.7.

Director Resignations

51

5.8.

Treatment of Company Warrants.

51

SECTION 6 - ADDITIONAL AGREEMENTS

52

6.1.

NYSE American; Post-Closing SEC Reports

52

 

 

Table of Contents

 

6.2.

Access to Information

52

6.3.

Public Disclosure

53

6.4.

Approvals and Consents

53

6.5.

Notification of Certain Matters; Litigation

54

6.6.

Indemnification

55

6.7.

Fee Schedule

56

6.8.

401(k); Benefit Plans

57

6.9.

Employee Benefits

57

6.10.

State Takeover Laws

58

6.11.

FIRPTA Certificate

58

6.12.

Cooperation

58

6.13.

Further Assurances

59

SECTION 7 - CONDITIONS PRECEDENT TO THE OBLIGATION  OF PARTIES TO CONSUMMATE THE MERGER

59

7.1.

Conditions to Obligations of Each Party to Effect the Merger

59

7.2.

Additional Conditions to the Obligations of Parent and Merger Sub

59

7.3.

Additional Conditions to the Obligations of the Company

60

7.4.

Frustration of Closing Conditions

61

SECTION 8 - TERMINATION, AMENDMENT AND WAIVER

61

8.1.

Termination

61

8.2.

Effect of Termination

62

8.3.

Fees and Expenses

63

8.4.

Amendment

63

8.5.

Waiver

63

SECTION 9 - MISCELLANEOUS

63

9.1.

No Survival

63

9.2.

Notices

64

9.3.

Entire Agreement

65

9.4.

Governing Law

65

9.5.

Binding Effect; No Assignment; No Third-Party Beneficiaries

65

9.6.

Counterparts and Signature

65

9.7.

Severability

66

9.8.

Submission to Jurisdiction; Waiver

66

 

 

9.9.

Service of Process

66

9.10.

Rules of Construction

66

9.11.

Specific Performance

67

9.12.

No Waiver; Remedies Cumulative

67

9.13.

Waiver of Jury Trial

67

 

Annexes

Annex I

Definitions

Annex II

Form of Certificate of Incorporation of the Surviving Corporation

 

 

AGREEMENT AND PLAN OF MERGER

 

PREAMBLE

 

THIS AGREEMENT AND PLAN OF MERGER (this “Agreement”), dated as of June 6, 2024, is by and among KARL STORZ Endoscopy-America, Inc., a California corporation (“Parent”), Karl Storz California Inc., a California corporation and a wholly owned Subsidiary of Parent (“Merger Sub”), and Asensus Surgical, Inc. (the “Company”), a Delaware corporation.

 

RECITALS

 

WHEREAS, each of the board of directors of Parent, Merger Sub and the Company has approved this Agreement and the transactions contemplated hereby, including the merger of Merger Sub with and into the Company, with the Company being the surviving corporation (the “Merger”) in accordance with the Delaware General Corporation Law (“DGCL”) on the terms and subject to the conditions set forth in this Agreement;

 

WHEREAS, the Board of Directors of the Company (the “Company Board of Directors”) has (i) determined that the Merger and the transactions contemplated hereby are advisable, fair to and in the best interests of the Company and the Company’s stockholders; (ii) approved and declared it advisable to enter into this Agreement; (iii) directed that the adoption of this Agreement be submitted to a vote of the Company’s stockholders at the Stockholders Meeting (as defined below); and (iv) subject to the terms and conditions of this Agreement, resolved to recommend that the Company’s stockholders approve the adoption of this Agreement and approve the Merger on the terms and subject to the conditions set forth herein (the “Company Board Recommendation”);

 

WHEREAS, the board of directors of Merger Sub has approved this Agreement and the transactions contemplated hereby; and

 

WHEREAS, the Company, Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with the Merger and the other transactions contemplated hereby.

 

NOW, THEREFORE, the parties hereto hereby agree as follows:

 

SECTION 1- THE MERGER

 

1.1.         The Merger.

 

(a)    On the terms and subject to the conditions of this Agreement, at the Effective Time, the Company and Merger Sub will consummate the Merger in accordance with the DGCL, such that, at the Effective Time, (i) Merger Sub will be merged with and into the Company, and the separate corporate existence of Merger Sub will thereupon cease, (ii) the Company will be the successor or surviving corporation in the Merger and will continue to be governed by the Laws of the State of Delaware, (iii) the corporate existence of the Company with all of its rights, privileges, powers and franchises will continue and (iv) the Company will succeed to and assume all the rights and obligations of Merger Sub. The corporation surviving the Merger is sometimes referred to as the “Surviving Corporation.” The Merger will have the effects set forth in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of the Company and Merger Sub will be vested in the Surviving Corporation, and all debts, liabilities and duties of the Company and Merger Sub will be the debts, liabilities and duties of the Surviving Corporation, including, without limitation, those liabilities set forth in Section 1.1(a) of the Company Disclosure Letter.

 

 

 

(b)    At the Effective Time, the certificate of incorporation of the Company will, by virtue of the Merger, be amended and restated in its entirety to be as set forth in Annex II and, as so amended, will be the certificate of incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law. The name of the Surviving Corporation will be Asensus Surgical, Inc.

 

(c)    At the Effective Time, and without any further action on the part of the Company or Merger Sub, the bylaws of the Company will be amended and restated in their entirety to be identical to the bylaws of Merger Sub as in effect immediately prior to the Effective Time, except that all references therein to Merger Sub will be deemed to be references to the Surviving Corporation, and, as so amended, will be the bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law.

 

1.2.       Effective Time. Parent, Merger Sub and the Company will cause a certificate of merger (the “Certificate of Merger”) to be executed and filed on the Closing Date (or on such other date as Parent and the Company may agree) with the Secretary of State of the State of Delaware as provided in the DGCL. The Merger will become effective on the time and date on which the Certificate of Merger has been duly filed with the Secretary of State of the State of Delaware or such later time and date as is specified in the Certificate of Merger, such time referred to as the “Effective Time.”

 

1.3.        The Closing. On the terms and subject to the conditions of this Agreement and in accordance with the DGCL, the closing of the Merger (the “Closing”) will occur at 9:00 a.m. New York time on the second (2nd) Business Day after the satisfaction or waiver (to the extent permitted by applicable Law) of all of the conditions set forth in SECTION 7 (other than such conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions at or prior to the Closing) (the date on which the Closing occurs, the “Closing Date”), by electronic exchange of deliverables, unless another date, time or place is agreed to in writing by the parties hereto.

 

1.4.       Directors and Officers of the Surviving Corporation. The directors of Merger Sub immediately prior to the Effective Time will, from and after the Effective Time, be the directors of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time will, from and after the Effective Time, be the officers of the Surviving Corporation, in each case, until their respective successors have been duly elected, designated or qualified, or until their earlier death, disqualification, resignation or removal in accordance with the Surviving Corporation’s certificate of incorporation and bylaws.

 

 

1.5.       Subsequent Actions. At and after the Effective Time, the Merger will have the effects set forth in the DGCL. If at any time after the Effective Time the Surviving Corporation determines, in its sole discretion, that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right and title to, or interest in, any of the rights, properties or assets of either the Company or Merger Sub held or to be held by the Surviving Corporation as a result of, or in connection with, the Merger or otherwise to carry out this Agreement, then the officers and directors of the Surviving Corporation will be authorized to execute and deliver, in the name and on behalf of either the Company or Merger Sub, all such deeds, bills of sale, instruments of conveyance, assignments and assurances and to take and do, in the name and on behalf of each such corporation or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm all right and title to, or interest in, such rights, properties or assets in the Surviving Corporation or otherwise to carry out this Agreement.

 

SECTION 2- CONVERSION OF SECURITIES

 

2.1.       Conversion of Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holders of any shares of common stock of the Company, par value $0.001 per share (the “Shares”), or any shares of common stock, par value $0.001 per share, of Merger Sub (“Merger Sub Common Stock”):

 

(a)    Merger Sub Common Stock. Each issued and outstanding share of Merger Sub Common Stock will be converted into and become one (1) fully paid and nonassessable share of common stock of the Surviving Corporation.

 

(b)    Cancellation of Treasury Stock and Parent-Owned Stock. All Shares that are owned by the Company as treasury stock and any Shares owned by Parent or Merger Sub will automatically be cancelled and retired and will cease to exist, and no consideration will be payable in exchange therefor.

 

(c)    Conversion of Shares. Each Share issued and outstanding immediately prior to the Effective Time (other than Shares to be cancelled in accordance with Section 2.1(b) and any Dissenting Shares) will be converted into the right to receive an amount in cash equal to $0.35 (the “Merger Consideration”). From and after the Effective Time, all such Shares will no longer be outstanding and will automatically be cancelled and retired and will cease to exist, and each holder of a certificate share (a “Certificate”) or book-entry share (a “Book-Entry Share”) representing any such Shares will cease to have any rights with respect thereto, except the right to receive the Merger Consideration therefor, without interest thereon, upon the surrender of such Certificate or transfer of such Book-Entry Share in accordance with Section 2.2.

 

2.2.        Exchange of Certificates.

 

(a)    Paying Agent. Parent will designate Continental Stock Transfer & Trust Company or another bank or trust company that is reasonably acceptable to the Company to act as agent for the holders of the Shares in connection with the Merger (the “Paying Agent”) and to receive the funds to which holders of the Shares will become entitled in accordance with Section 2.1(c). The agreement pursuant to which Parent shall appoint the Paying Agent shall be in form and substance reasonably acceptable to the Company. Parent will, or will cause the Surviving Corporation to provide to the Paying Agent on a timely basis, promptly after the Effective Time (and no later than the same day as the Effective Time occurs to the extent that the Effective Time is before 1:00 p.m. New York time, or else, the next Business Day) and as and when needed after the Effective Time, cash necessary to pay for the Shares converted in the Merger into the right to receive the Merger Consideration (the “Exchange Fund”). If the Exchange Fund is inadequate to pay the amounts to which holders of the Shares are entitled in accordance with Section 2.1(c), Parent will promptly deposit, or cause the Surviving Corporation promptly to deposit, additional cash with the Paying Agent sufficient to make all payments of Merger Consideration, and Parent and the Surviving Corporation will in any event be liable for payment thereof. The Paying Agent may invest the cash in the Exchange Fund as directed by Parent. Any interest and other income resulting from such investments will be paid to Parent.

 

 

(b)    Exchange Procedures. Promptly after the Effective Time (but in no event later than five (5) Business Days thereafter), the Paying Agent will mail to each holder of record of a Certificate, which immediately prior to the Effective Time represented outstanding Shares, whose shares were converted in accordance with Section 2.1(c) into the right to receive the Merger Consideration (i) a letter of transmittal (which will specify that delivery will be effected, and risk of loss and title to the Certificate will pass, only upon delivery of the Certificate to the Paying Agent and will be in such form and have such other provisions as Parent may reasonably specify) and (ii) instructions for effecting the surrender of the Certificate in exchange for payment of the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent or to such other agent or agents as may be appointed by Parent, together with such letter of transmittal, duly executed and properly completed and such other documents as may be reasonably requested by the Paying Agent, the holder of such Certificate will be entitled to receive in exchange therefor the Merger Consideration (such payments to be net of applicable Taxes withheld in accordance with Section 2.5) for each Share formerly represented by such Certificate, and the Certificate so surrendered will forthwith be cancelled. Until surrendered as contemplated by this Section 2.2, each Certificate will be deemed at any time after the Effective Time to represent only the right to receive the Merger Consideration in cash as contemplated by this Section 2.2, without interest thereon, and will not evidence any interest in, or any right to exercise the rights of a stockholder or other equity holder of, the Company or the Surviving Corporation. Notwithstanding anything to the contrary in this Agreement, any holder of Book-Entry Shares will not be required to deliver a Certificate or an executed letter of transmittal to the Paying Agent to receive the Merger Consideration that such holder is entitled to receive pursuant to this SECTION 2. In lieu thereof, each holder of record of one or more Book-Entry Shares whose Shares were converted into the Merger Consideration will upon receipt by the Paying Agent of such evidence, if any, as the Paying Agent may reasonably request, be entitled to receive, and Parent will cause the Paying Agent to pay, subject to any required withholding of Taxes, the Merger Consideration in respect of each such Share, and the Book-Entry Shares of such holder will forthwith be cancelled.

 

(c)    Transfer Taxes. If any payment in accordance with the Merger is to be made to a Person other than the Person in whose name the surrendered Certificate or Book-Entry Share is registered, it will be a condition of payment that (i) the Certificate or Book-Entry Shares surrendered will be properly endorsed or will be otherwise in proper form for transfer and (ii) the Person requesting such payment will have paid all transfer and other Taxes required by reason of the payment to a Person other than the registered holder of the Certificate or Book-Entry Share surrendered or will have established to the satisfaction of Parent that such Tax either has been paid or is not applicable. None of Parent, Merger Sub and the Surviving Corporation will have any liability for the transfer Taxes and other similar Taxes described in this Section 2.2(c) under any circumstances.

 

 

(d)    Transfer Books; No Further Ownership Rights in Shares. At the Effective Time, the stock transfer books of the Company will be closed and, thereafter no further registration of transfers of Shares will be made on the records of the Company. From and after the Effective Time, the holders of Certificates or Book-Entry Shares evidencing ownership of Shares outstanding immediately prior to the Effective Time will cease to have any rights with respect to such Shares, except as otherwise provided for herein or by Law. If, after the Effective Time, Certificates or Book-Entry Shares are presented to the Surviving Corporation, then they will be cancelled and exchanged as provided in this SECTION 2.

 

(e)    Termination of Exchange Fund; No Liability. At any time following twelve (12)  months after the Effective Time, the Surviving Corporation will be entitled to require the Paying Agent to deliver to it any funds (including any interest received with respect thereto) made available to the Paying Agent and not disbursed (or for which disbursement is pending subject only to the Paying Agent’s routine administrative procedures) to holders of Certificates and Book-Entry Shares, and thereafter such holders will be entitled to look only to the Surviving Corporation (subject to abandoned property, escheat or other similar Laws) only as general creditors thereof with respect to the Merger Consideration payable upon due surrender of their Certificates or Book-Entry Shares, without any interest thereon. Nonetheless, none of Parent, the Surviving Corporation nor the Paying Agent will be liable to any holder of a Certificate or Book-Entry Share for Merger Consideration delivered to a public official in accordance with any applicable abandoned property, escheat or similar Law. Any amounts remaining unclaimed by such holders at such time at which such amounts would otherwise escheat to or become property of any Governmental Authority shall become, to the extent permitted by applicable Law, the property of the Surviving Corporation or its designee, free and clear of all claims or interest of any Person previously entitled thereto.

 

(f)    Lost Certificates. If any Certificate will have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent or the Paying Agent, the posting by such Person of a bond in such amount as Parent or the Paying Agent may reasonably direct as indemnity against any claim that may be made against it or the Surviving Corporation with respect to such Certificate, the Paying Agent will deliver in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration with respect thereto.

 

2.3.        Dissenting Shares.

 

(a)    Notwithstanding anything in this Agreement to the contrary, Shares outstanding immediately prior to the Effective Time and held by a holder who has complied with Section 262 of the DGCL with respect to such Shares (the “Dissenting Shares”) will not be converted into a right to receive the Merger Consideration, unless such holder fails to perfect or withdraws or otherwise loses his, her or its right to appraisal. From and after the Effective Time, a stockholder who has properly exercised such appraisal rights will not have any rights of a stockholder of the Company or the Surviving Corporation with