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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

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 Pursuant to §240.14a-12

SOLITON, 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 computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

  (5)  

Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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LOGO

SOLITON, INC.

5304 Ashbrook Drive

Houston, TX 77081

June 15, 2021

PROPOSED MERGER—YOUR VOTE IS VERY IMPORTANT

Dear Soliton, Inc. Stockholder:

You are cordially invited to attend a special meeting of stockholders of Soliton, Inc., a Delaware corporation (“Soliton”), on July 20, 2021 at 8:30 a.m., Central Time, at the Hilton Garden Inn Galleria located at 3201 Sage Road, Houston, TX 77056.

On May 8, 2021, Soliton entered into an Agreement and Plan of Merger (the “merger agreement”), dated as of May 8, 2021, by and among Soliton, AbbVie Inc., a Delaware corporation (“AbbVie”), and Scout Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of AbbVie (“Merger Sub”), pursuant to which, subject to the satisfaction or waiver (if permissible under applicable law) of specified conditions more fully described in the merger agreement, Soliton will be acquired by AbbVie. Subject to the terms and conditions of the merger agreement, Merger Sub will merge with and into Soliton, with Soliton surviving the merger as a wholly owned subsidiary of AbbVie (the “merger”). The Board of Directors (the “Board”) of Soliton, based in part upon the unanimous recommendation of a Strategic Alternatives Committee of the Board, has unanimously adopted and approved the merger agreement.

If the merger is completed, each share of common stock, par value $0.001 per share, of Soliton that you own will be converted into the right to receive $22.60 in cash, without interest, unless you exercise and perfect your appraisal rights under the Delaware General Corporation Law.

We are sending you the accompanying proxy statement to ask you to attend a special meeting of Soliton’s stockholders to consider and vote upon a proposal to adopt the merger agreement. We also are asking you to consider and vote upon a proposal to adjourn the special meeting, if necessary or appropriate, including to permit further solicitation of proxies in favor of adoption of the merger agreement. Information about the special meeting, and how to vote your shares by proxy if you are unable to attend, is included in the proxy statement.

After careful consideration, the Board, based in part upon the unanimous recommendation of a Strategic Alternatives Committee of the Board, has unanimously (i) 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 Soliton and its stockholders, (ii) duly authorized and approved the execution, delivery and performance by Soliton of the merger agreement and the consummation by Soliton of the merger and the other transactions contemplated by the merger agreement, (iii) directed that the adoption of the merger agreement be submitted to holders of Soliton’s common stock, (iv) recommended that the holders of Soliton common stock vote their shares to adopt the merger agreement at a meeting of the holders of Soliton’s common stock and (v) approved the Support Agreements (as defined below). Accordingly, the Board unanimously recommends that you vote “FOR” the adoption of the merger agreement and “FOR” one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of adoption of the merger agreement.


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The accompanying proxy statement provides you with information about the proposed merger and the special meeting of Soliton’s stockholders. Soliton encourages you to read the proxy statement carefully in its entirety. You may also obtain more information about Soliton from documents Soliton has filed with the Securities and Exchange Commission.

Your vote is important.

The merger cannot be completed unless the merger agreement is adopted by the affirmative vote of the holders of a majority of the outstanding shares of Soliton’s common stock. The failure of any stockholder to vote will have the same effect as a vote against adopting the merger agreement. Accordingly, whether or not you plan to attend the special meeting, you are requested to promptly vote your shares by completing, signing and dating the enclosed proxy card or voting instruction form and returning it in the postage-paid envelope provided, or by voting over the telephone or via the Internet as instructed in these materials.

If you sign, date and mail your proxy card without indicating how you wish to vote, your vote will be counted as a vote “FOR” adoption of the merger agreement and “FOR” one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of adoption of the merger agreement.

If you have additional questions or need assistance in voting your shares, please contact Soliton’s proxy solicitation agent:

Saratoga Proxy Consulting, LLC

520 8th Avenue

New York, NY 10018

Stockholders may call toll-free: (888) 368-0379

info@saratogaproxy.com

Thank you in advance for your cooperation and continued support.

Sincerely,

 

 

LOGO

Bradley Hauser

Chief Executive Officer

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the merger agreement, passed upon the merits or fairness of the merger or passed upon the adequacy or accuracy of the accompanying proxy statement. Any representation to the contrary is a criminal offense.

The accompanying proxy statement is dated June 15, 2021 and is first being mailed to Soliton stockholders on or about June 17, 2021.


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LOGO

SOLITON, INC.

5304 Ashbrook Drive

Houston, TX 77081

 

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

 

A special meeting of stockholders of Soliton, Inc. will be held at the Hilton Garden Inn Galleria located at 3201 Sage Road, Houston, TX 77056 on July 20, 2021, at 8:30 a.m., Central Time, for the following purposes:

 

1.

Adoption of the Merger Agreement. To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of May 8, 2021 and as it may be amended or supplemented (referred to in the accompanying proxy statement as the “merger agreement”), by and among AbbVie Inc., a Delaware corporation (“AbbVie”), Scout Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of AbbVie (“Merger Sub”), and Soliton, Inc., a Delaware corporation (“Soliton”, “we” or “us”), pursuant to which Merger Sub will be merged with and into Soliton, with Soliton surviving the merger as a wholly owned subsidiary of AbbVie, which transaction is referred to as the “merger” (the “merger proposal”); and

 

2.

Adjournment of the Special Meeting. To consider and vote upon a proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of the merger proposal (the “adjournment proposal”).

Soliton’s stockholders of record at the close of business on June 9, 2021 are entitled to notice of and to vote at the special meeting and at any adjournment or postponement of the special meeting.

The merger agreement is more fully described in the accompanying proxy statement, which we encourage you to read carefully and in its entirety before voting. A copy of the merger agreement is included as Annex A to the accompanying proxy statement. The accompanying proxy statement is a part of this notice.

All Soliton stockholders of record are cordially invited to attend the special meeting. Even if you plan to attend the special meeting, we urge you to submit a valid proxy promptly. If your shares of Soliton common stock are registered in your own name, you may submit your proxy by (1) filling out and signing the proxy card, and then mailing your signed proxy card in the enclosed postage-paid reply envelope, or (2) authorizing the voting of your shares over the Internet or by telephone by following the instructions on the enclosed proxy card. If your shares are held in “street name,” you should follow the enclosed instructions that your broker, bank or other nominee has provided.

Your vote is very important regardless of the number of shares of our common stock you own. We cannot complete the merger unless the merger agreement is adopted by the affirmative vote of the holders of a majority of the outstanding shares of our common stock. Accordingly, we urge you to review the enclosed materials and request that you complete, sign, date and return, as promptly as possible, the enclosed proxy card in the accompanying postage-paid reply envelope or submit your proxy over the Internet or by telephone.

Stockholders of Soliton who do not vote in favor of adopting the merger agreement will have the right to seek appraisal of the fair value of their shares if the merger is completed, but only if they submit a written demand for appraisal to Soliton prior to the time the vote is taken on the merger agreement and comply with all


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other requirements of the Delaware General Corporation Law (“DGCL”). A copy of the applicable statutory provisions of Section 262 of the DGCL is included as Annex E to the accompanying proxy statement, and a summary of these provisions can be found under “Appraisal Rights” in the accompanying proxy statement.

Our Board of Directors unanimously recommends that you vote “FOR” adoption of the merger agreement as described in proposal 1 and “FOR” approval of one or more adjournments of the special meeting in accordance with proposal 2. Because the adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock, if you either fail to vote, fail to authorize your broker, bank or other nominee to vote on your behalf, or if you abstain from voting, the effect will be the same as if you had voted against the merger proposal.

BY ORDER OF THE BOARD OF DIRECTORS,

 

 

LOGO

Lori Bisson

Corporate Secretary

Houston, Texas

June 15, 2021


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SUMMARY

     1  

QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

     11  

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

     17  

THE SPECIAL MEETING

     18  

THE COMPANIES

     22  

PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

     23  

THE MERGER

     24  

Overview

     24  

Background of the Merger

     25  

Recommendation of the Board and Soliton’s Reasons for the Merger

     37  

Opinion of Financial Advisor

     41  

Certain Unaudited Prospective Financial Information

     54  

Interests of Directors and Executive Officers in the Merger

     56  

No Financing Condition; Financing Cooperation

     63  

Regulatory Waiting Periods

     63  

Delisting and Deregistration of Common Stock

     63  

Litigation Relating to the Merger

     63  

THE MERGER AGREEMENT

     64  

The Merger

     64  

Closing and Effective Time of the Merger

     64  

Merger Consideration

     65  

Cancellation of Shares

     65  

Directors and Officers

     65  

Treatment of Equity and Equity-Based Awards

     65  

Treatment of Warrants

     66  

Stockholders Seeking Appraisal

     66  

Payment for the Shares

     66  

Representations and Warranties

     67  

Covenants Regarding Conduct of Business by Soliton Pending the Effective Time

     70  

No Solicitation of Takeover Proposals

     73  

Change in Board Recommendation

     75  

Reasonable Best Efforts and Certain Pre-Closing Obligations

     77  

Access to Information; Confidentiality

     78  

Meeting of Our Stockholders

     78  

Indemnification

     79  

Employee Benefits Matters

     80  

Additional Agreements

     81  

Conditions to the Merger

     81  

Financing of the Merger

     82  

Termination of the Merger Agreement

     83  

Soliton Termination Fee

     84  

AbbVie Additional Payments and Termination Fee

     85  

Effect of Termination

     86  

Amendment, Extension and Waiver

     87  

Governing Law

     87  

SUPPORT AGREEMENTS

     88  

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

     91  

APPRAISAL RIGHTS

     95  

PROPOSAL 2: APPROVAL OF AUTHORITY TO ADJOURN THE SPECIAL MEETING

     100  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     101  

 

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MARKET PRICE AND DIVIDEND INFORMATION

     103  

STOCKHOLDER PROPOSALS

     104  

HOUSEHOLDING

     104  

WHERE YOU CAN FIND MORE INFORMATION

     105  

ANNEX A—AGREEMENT AND PLAN OF MERGER

     A-1  

ANNEX B—REMEDITEX SUPPORT AGREEMENT

     B-1  

ANNEX C—FORM OF OFFICER SUPPORT AGREEMENT

     C-1  

ANNEX D—OPINION OF GUGGENHEIM SECURITIES, LLC

     D-1  

ANNEX E—SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE

     E-1  

 

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SUMMARY

The following summary highlights selected information contained elsewhere in this proxy statement and may not contain all the information that is important to you. Accordingly, you are urged to read carefully the entire proxy statement, its annexes and the other documents referred to in this proxy statement for a more complete understanding of the merger agreement and the proposed merger, as each is defined above. Also, see “Where You Can Find More Information” on page 104 of this proxy statement for information on how you can view the documents that Soliton has filed with the Securities and Exchange Commission (the “SEC”). Each item in this summary refers, where applicable, to the page of this proxy statement on which that item is discussed in more detail.

Parties to the Merger

Soliton, Inc. (see page 22)

Soliton is a medical technology company focused on developing and commercializing products utilizing its proprietary designed acoustic shockwave technology platform referred to as Rapid Acoustic Pulse (“RAP”). Soliton is a pre-revenue stage company with its first product, RESONICTM, preparing for launch for the removal of tattoos and the reduction of cellulite. Soliton’s RESONIC console uses rapid pulses of designed acoustic shockwaves to disrupt cellular structures in the dermal and subdermal tissue. The uniqueness of Soliton’s designed shockwave allows Soliton to target the differential in stiffness between cellular structures and generate a shearing effect that Soliton believes represents a platform technology potentially useful in tattoo removal, cellulite treatment, fibrotic scar treatment and other indications. Soliton believes the high repetition rate, rapid rise and fall of the wave, and significant peak pressure delivered in a non-focused manner make its shockwave significantly different from other available shockwave technologies. Importantly, Soliton’s technology allows the disruption of targeted structures within the skin with only minimal discomfort and without additional treatment-related downtime for tattoo removal or any downtime for cellulite treatment.

Soliton’s principal executive offices are located at located at 5304 Ashbrook Drive, Houston, TX 77081 and its telephone number is (844) 705-4866. Soliton’s common stock, par value $0.001 per share (“common stock”), is listed and traded on The NASDAQ Capital Market (“NASDAQ”) under the symbol “SOLY.”

AbbVie Inc. (see page 22)

AbbVie is a global, research-based biopharmaceutical company. AbbVie uses its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world’s most complex and serious diseases. Allergan Aesthetics, an AbbVie company, develops, manufactures and markets a portfolio of leading aesthetics brands and products.

AbbVie’s principal executive offices are located at 1 North Waukegan Road, North Chicago, Illinois 60064-6400 and its telephone number is (847) 932-7900. AbbVie’s common stock is listed and traded on The New York Stock Exchange under the symbol “ABBV.”

Scout Merger Sub, Inc. (see page 22)

Scout Merger Sub, Inc., a wholly owned subsidiary of AbbVie, is a Delaware corporation that was formed on April 29, 2021, for the purpose of effecting the merger. Merger Sub has not engaged in any business to date except for activities incidental to its incorporation and activities undertaken in connection with the merger and the other transactions contemplated by the merger agreement. If the merger agreement is adopted by Soliton’s stockholders and the merger is consummated, Merger Sub will be merged with and into Soliton, with Soliton surviving the merger as a wholly owned subsidiary of AbbVie.



 

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The principal executive offices of Merger Sub are located at 1 North Waukegan Road, North Chicago, Illinois 60064-6400 and its telephone number is (847) 932-7900.

The Merger (see page 64)

Soliton, AbbVie and Merger Sub entered into an Agreement and Plan of Merger, which we refer to as the “merger agreement,” on May 8, 2021. A copy of the merger agreement is included as Annex A to this proxy statement. Under the terms of the merger agreement, subject to the satisfaction or waiver (if permissible under applicable law) of specified conditions as more fully described in the merger agreement, Merger Sub will be merged with and into Soliton, which we refer to as the “merger.” Soliton will survive the merger as a wholly owned subsidiary of AbbVie (the “surviving corporation”). The merger is subject to regulatory clearances and other conditions, in addition to the approval of the stockholders of Soliton at the special meeting. It is possible that factors outside the control of Soliton and AbbVie could result in the merger being completed later than anticipated or not at all.

Merger Consideration (see page 65)

Upon completion of the merger, each issued and outstanding share of Soliton common stock will automatically be canceled and will cease to exist and will be converted into the right to receive $22.60 in cash, without interest (the “merger consideration”) and subject to any applicable withholding taxes (other than (i) shares of Soliton common stock where the holder has properly exercised appraisal rights under Section 262 of the DGCL (and has not withdrawn such exercise or lost such rights) and (ii) shares of Soliton common stock owned by Soliton, AbbVie or Merger Sub).

Treatment of Equity and Equity-Based Awards (see page 65)

Options. Immediately prior to the effective time of the merger, each option to purchase shares of Soliton common stock, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time of the merger will be cancelled, extinguished and of no further force or effect and automatically converted into the right to receive, as the sole consideration for each share of Soliton common stock underlying such option, an amount in cash, without interest and subject to any applicable withholding tax, equal to the excess of (i) the merger consideration over (ii) the per share exercise price that would be due in cash upon exercise of such option.

Restricted Stock Units. Immediately prior to the effective time of the merger, each restricted stock unit award that is outstanding immediately prior to the effective of the merger, whether vested, unvested or otherwise subject to forfeiture, will be cancelled, extinguished and of no further force or effect and automatically converted into the right to receive, as the sole consideration for each share of Soliton common stock underlying such restricted stock unit award, an amount in cash, without interest and subject to any applicable withholding tax, equal to the merger consideration.

Restricted Shares. Immediately prior to the effective time of the merger, each share of Soliton common stock subject to vesting and/or forfeiture conditions that is outstanding immediately prior to the effective time of the merger will automatically vest in full and become free of such restrictions and thereafter will terminate and be converted into the right to receive, as the sole consideration in respect of such terminated restricted share of Soliton common stock, an amount in cash, without interest and subject to any applicable withholding tax, equal to the merger consideration.

Treatment of Warrants (see page 66)

At the effective time of the merger, each warrant to purchase shares of Soliton common stock that is outstanding and unexercised immediately prior to the effective time of the merger will be cancelled and



 

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automatically converted into the right to receive an amount in cash, without interest and subject to any applicable withholding tax, equal to the excess of (i) the number of shares of Soliton common stock subject to such warrant, multiplied by the merger consideration over (ii) the number of shares of Soliton common stock subject to such warrant, multiplied by the exercise price of such warrant.

The Special Meeting of Stockholders (see page 18)

The special meeting will be held at the Hilton Garden Inn Galleria located at 3201 Sage Road, Houston, TX 77056 on July 20, 2021, at 8:30 a.m., Central Time. At the special meeting, holders of Soliton common stock will be asked to consider and vote upon the following two proposals:

 

   

Adoption of the merger agreement.

 

   

Approval of one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of adoption of the merger agreement.

Record Date for the Special Meeting (see page 18)

You are entitled to vote at the special meeting all of the shares of Soliton common stock you held of record as of the close of business on June 9, 2021, which is the record date for the special meeting. On the record date, there were 21,596,544 shares of Soliton common stock outstanding.

Appraisal Rights (see page 95)

Shares of Soliton common stock held by stockholders who have properly exercised appraisal rights under Section 262 of the DGCL (and have not withdrawn such exercise or lost such rights) will not be converted into the right to receive the merger consideration, but will instead be converted into the right to receive payment in cash for the fair value of their shares of Soliton common stock as determined in accordance with Section 262 of the DGCL. The fair value of shares of Soliton common stock as determined in accordance with Section 262 of the DGCL may be more or less than (or the same as) the merger consideration. Stockholders who wish to exercise appraisal rights must comply fully with all applicable requirements of Section 262 of the DGCL, which is summarized in this proxy statement and attached as Annex E to this proxy statement. Failure to follow exactly the procedures specified under Section 262 of the DGCL may result in the loss of appraisal rights. Because of the complexity of Section 262 of the DGCL relating to appraisal rights, if you are considering exercising your appraisal rights we encourage you to seek the advice of your own legal counsel.

Required Vote (see page 19)

Each share of Soliton common stock is entitled to one vote at the special meeting. The holders of a majority of the shares of Soliton common stock issued and outstanding and entitled to vote at the special meeting, present in person or represented by proxy, will constitute a quorum at the special meeting. Shares of Soliton common stock represented at the special meeting but not voted, including shares for which a stockholder directs an “abstention” from voting, will be counted as present for purposes of establishing a quorum. Because none of the proposals to be voted on at the special meeting are “routine” matters for which brokers may have discretionary authority to vote, Soliton does not expect any broker non-votes at the special meeting. Thus, if you fail to provide instructions with respect to any shares that you beneficially own through a broker, bank, trust, custodian or other nominee (we refer to those organizations collectively as “broker”), such shares will not be counted for purposes of establishing a quorum (although such shares will be present for establishing a quorum if you provide instructions to the broker, bank, trust, custodian or other nominee on at least one of the proposals presented in this proxy statement). Shares of Soliton common stock held in treasury will not be included in the calculation of the number of shares of Soliton common stock represented at the special meeting for purposes of determining whether a quorum is present. If a quorum is not present in person or represented by proxy, the special meeting may be adjourned or postponed until the holders of the number of shares of Soliton common stock required to constitute a quorum are present in person or represented by proxy.



 

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Approval of the proposals presented at the special meeting will require the following:

 

   

Adoption of the merger agreement requires the affirmative vote of the holders of a majority of the shares of Soliton common stock outstanding at the close of business on the record date (the “Stockholder Approval”).

 

   

Approval of one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of adoption of the merger agreement, will require the affirmative vote of the holders of a majority of the shares of Soliton common stock present in person or represented by proxy at the special meeting and entitled to vote upon this proposal.

An abstention from voting on any proposal will have the same effect as a vote against the proposal. Failure to submit a proxy (if you do not attend the special meeting in person) and failing to submit voting instructions to any broker, bank, trust, custodian or other nominee holding shares that you beneficially own will have the same effect as a vote against adoption of the merger agreement, but will not affect the outcome of the vote on the adjournment proposal.

Recommendation of the Board and Soliton’s Reasons for the Merger (see page 37)

The Board of Directors of Soliton (the “Board”) unanimously recommends that you vote “FOR” adoption of the merger agreement, and “FOR” approval of one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of adoption of the merger agreement.

In connection with its decision to recommend that you vote “FOR” adoption of the merger agreement, the Board unanimously (i) 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 Soliton and its stockholders, (ii) duly authorized and approved the execution, delivery and performance by Soliton of the merger agreement and the consummation by Soliton of the merger and the other transactions contemplated by the merger agreement, (iii) directed that the adoption of the merger agreement be submitted to holders of Soliton’s common stock, (iv) recommended that the holders of Soliton common stock vote their shares to adopt the merger agreement at a meeting of the holders of Soliton’s common stock and (v) approved the Support Agreements (as defined below). In making these decisions, the Board considered a number of factors, including the unanimous recommendation in favor of the merger of a Strategic Alternatives Committee of the Board entirely composed of independent directors (the “SAC”).

Interests of Directors and Executive Officers in the Merger (see page 56)

Soliton’s directors and executive officers have financial interests in the merger that may be different from, or in addition to, the interests of Soliton’s stockholders generally. The members of the Board were aware of and considered these interests in reaching the determination to adopt the merger agreement and recommend that Soliton’s stockholders vote their common stock to adopt the merger agreement. These interests include the following:

 

   

Each of Soliton’s directors and executive officers holds outstanding equity awards and, pursuant to the merger agreement, such persons will receive both accelerated vesting thereof and cash payments with respect thereto in connection with the merger.

 

   

Each of Soliton’s executive officers, three of whom are also directors, is party to an employment agreement with Soliton that provides for eligibility for severance payments and benefits upon a termination by Soliton without “cause” or by the executive for “good reason” (each a “qualifying termination”), whether occurring prior to or following a change in control.



 

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The employment agreement, as amended, for Bradley Hauser, Soliton’s President and Chief Executive Officer, provides for enhanced severance payments and benefits upon a qualifying termination in connection with a change in control and further provides that if Mr. Hauser becomes entitled to payments and/or benefits, whether under the employment agreement or otherwise (collectively, the “Total Payments”), that would result in Mr. Hauser being subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), he will be entitled to a gross-up payment. The amount of the gross-up payment is calculated such that, after he pays all applicable taxes on the gross-up payment (including any excise tax and any associated interest charges or penalties that could be imposed under Section 4999 of the Code), the net gross-up payment will equal the amount of the excise tax and any associated interest charges or penalties imposed by Section 4999 of the Code upon the Total Payments, such that the net amount he retains will equal the net amount of the Total Payments as if the excise tax imposed by Section 4999 of the Code was not applicable to the Total Payments. However, the amount of the gross-up payment to Mr. Hauser will not exceed $250,000 in any case.

 

   

Soliton’s directors and executive officers are entitled to continued indemnification and insurance coverage pursuant to the merger agreement.

 

   

Each of Walter V. Klemp, Soliton’s Executive Chairman, and Christopher Capelli, Soliton’s Vice Chairman and Chief Science Officer, has entered into a support agreement with AbbVie and Merger Sub, pursuant to which he has agreed, subject to certain exceptions, to vote his shares of Soliton common stock in favor of the adoption and approval of the merger agreement, against any competing transaction and against any other action that is intended or could reasonably be expect to impede or interfere with or materially delay the merger.

 

   

As the inventor of the intellectual property Soliton licenses from The Board of Regents of The University of Texas System on behalf of The University of Texas M. D. Anderson Cancer Center (“MD Anderson”), Dr. Capelli is entitled to 50% of the license income that Soliton is required to pay to MD Anderson pursuant to its license agreement with MD Anderson. In addition, Dr. Capelli is entitled to 50% of the proceeds from the sale by MD Anderson of up to 75,000 shares of Soliton common stock that were issued to MD Anderson in connection with the license agreement.

 

   

As a member of the SAC, each of Jonathan P. Foster, Danika Harrison and Niquette Hunt has received and will continue to receive compensation for service as a member of the SAC, including an increased amount of compensation during the period from March through July 2021. Each independent director, including the members of the SAC, has received and will continue to receive additional compensation as an independent director during the same period.

Please see the section entitled “The Merger—Interests of Directors and Executive Officers in the Merger” beginning on page 56 of this proxy statement for additional information about these financial interests.

Support Agreements (see page 88)

Remeditex Support Agreement

Concurrently with the execution and delivery of the merger agreement, Remeditex Ventures LLC (“Remeditex”) entered into a support agreement with AbbVie and Merger Sub (the “Remeditex Support Agreement”), pursuant to which, Remeditex has agreed to vote all of its shares of Soliton common stock (i) in favor of the adoption and approval of the merger agreement, (ii) against any change in the Board, (iii) against any takeover proposal from a third party unless and until the merger agreement is terminated and (iv) against any other action that is intended or could reasonably be expected to impede or interfere with or materially delay the merger; provided, however, that in the event of a change in the Board’s recommendation, Remeditex will only be required to vote as described in clauses (i)-(iv) above a number of shares of Soliton common stock equal to 35%



 

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of the total voting power of the outstanding shares of Soliton common stock. As of June 9, 2021, Remeditex held voting power over 9,214,277 shares of Soliton common stock (approximately 42.7% of the outstanding shares of Soliton common stock).

The Remeditex Support Agreement will terminate upon the earliest of (i) the effective time of the merger, (ii) a material modification or amendment of the merger agreement that reduces the consideration payable thereunder, (iii) the termination of the merger agreement in accordance with its terms and (iv) the mutual agreement of the parties.

Officer Support Agreement

Concurrently with the execution and delivery of the merger agreement, AbbVie and Merger Sub entered into support agreements with each of Mr. Klemp and Dr. Capelli (the “Officer Support Agreements” and, together with the Remeditex Support Agreements, the “Support Agreements”), pursuant to which, each of Mr. Klemp and Dr. Capelli has agreed to vote all of his shares of Soliton common stock (i) in favor of the adoption of the merger agreement, (ii) against any takeover proposal from a third party unless and until the merger agreement is terminated and (iii) against any other action that is intended or could reasonably be expected to impede or interfere with or materially delay the merger. As of June 9, 2021, Mr. Klemp and Dr. Capelli collectively held voting power over 688,440 shares of Soliton common stock (approximately 3.19% of the outstanding shares of Soliton common stock).

The Officer Support Agreements will terminate upon the earliest of (i) the effective time of the merger, (ii) a change in the Board’s recommendation, (iii) a material modification or amendment of the merger agreement that reduces the consideration payable thereunder, (iv) the termination of the merger agreement in accordance with its terms and (v) the mutual agreement of the parties.

Shares Held by Directors and Executive Officers (see page 101)

As of the close of business on June 9, 2021, the current directors and executive officers of Soliton collectively held voting power over 828,440 shares of Soliton common stock, which represented approximately 3.8% of the shares of Soliton common stock outstanding on that date.

Opinion of Financial Advisor (see page 41)

The SAC retained Guggenheim Securities, LLC (“Guggenheim Securities”) as its financial advisor in connection with a potential sale of Soliton. In connection with the merger, Guggenheim Securities rendered an opinion to the SAC to the effect that, as of May 8, 2021 and based on and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken, the merger consideration was fair, from a financial point of view, to the holders of the issued and outstanding shares of common stock of Soliton. At the SAC’s request and with the SAC’s authorization, Guggenheim Securities also provided such opinion to the Board. The full text of Guggenheim Securities’ written opinion, which is attached as Annex D to this proxy statement and which you should read carefully and in its entirety, is subject to the assumptions, limitations, qualifications and other conditions contained in such opinion and is necessarily based on economic, business, capital markets and other conditions, and the information made available to Guggenheim Securities, as of the date of such opinion.

Guggenheim Securities’ opinion was provided to the SAC and the Board (solely in their respective capacities as such) for their respective information and assistance in connection with their respective evaluation of the merger consideration. Guggenheim Securities’ opinion and any materials provided in connection therewith did not constitute a recommendation to the SAC or the Board with respect to the merger, nor does Guggenheim



 

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Securities’ opinion or the summary of its underlying financial analyses elsewhere in this proxy statement constitute advice or a recommendation to any holder of Soliton common stock as to how to vote or act in connection with the merger or otherwise. Guggenheim Securities’ opinion addresses only the fairness, from a financial point of view and as of the date of such opinion, of the merger consideration to holders of Soliton common stock to the extent expressly specified in such opinion and does not address any other term, aspect or implication of the merger (including, without limitation, the form or structure of the merger), the merger agreement or any support agreement or any other agreement, transaction document or instrument contemplated by the merger agreement or to be entered into or amended in connection with the merger or any financing or other transactions related thereto.

For a description of the opinion that the SAC and the Board received from Guggenheim Securities, see “The Merger—Opinion of Financial Advisor” beginning on page 41.

Material U.S. Federal Income Tax Consequences of the Merger (see page 91)

The receipt of cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Generally, for U.S. federal income tax purposes, if you are a stockholder who is a U.S. holder, you will recognize capital gain or loss equal to the difference between the amount of cash you receive in the merger and your adjusted tax basis in the common stock converted into cash in the merger. If you are a stockholder who is a non-U.S. holder, the merger will generally not be a taxable transaction to you under U.S. federal income tax laws unless you have certain connections to the United States.

You should read the section entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 91 for a more detailed discussion of the U.S. federal income tax consequences of the merger. Tax matters can be complicated and the tax consequences of the merger to you will depend on your particular tax situation. You are encouraged to consult your tax advisor to determine the tax consequences of the merger to you.

Financing of the Merger (see page 82)

The merger agreement does not contain any financing-related closing condition and AbbVie has represented that it will have sufficient funds at closing to fund the payment of the merger consideration and any other payments required in connection with the consummation of the merger. AbbVie has informed Soliton that it expects that funds needed by AbbVie and Merger Sub in connection with the merger will be derived from AbbVie’s existing cash and cash equivalents, and available borrowing capacity under existing credit facilities.

Regulatory Approvals (see page 63)

The merger is subject to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), which provides that the merger may not be completed until the applicable waiting period under the HSR Act is terminated or expires. On June 2, 2021, Soliton and AbbVie filed the requisite notification and report forms under the HSR Act with the Antitrust Division of the Department of Justice and the Federal Trade Commission. If the parties do not receive either early termination or a request for additional information from the relevant antitrust authority, the waiting period under the HSR Act will expire at 11:59 p.m. on July 2, 2021.

At any time before or after the effective time of the merger, any reviewing antitrust authorities or another person could take action under the antitrust laws as it deems necessary or desirable in the public interest, including without limitation seeking to enjoin the completion of the merger, seeking a rescission or other unwinding of the merger, or permitting completion subject to regulatory concessions or conditions. We cannot assure you that a challenge to the merger will not be made or that, if a challenge is made, it will not succeed.



 

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Conditions to the Merger (see page 81)

Each party’s obligation to consummate the merger is subject to the satisfaction or waiver (to the extent such waiver is permissible under applicable law), on or prior to the closing date of the merger (the “closing date”) of the following conditions:

 

   

receipt of the Stockholder Approval;

 

   

the expiration or early termination of any applicable waiting period under the HSR Act, and no voluntary agreement between AbbVie, Merger Sub or Soliton and any governmental authority not to consummate the merger shall be in effect;

 

   

the absence of any temporary restraining order, injunction or other judgment issued by any governmental authority of competent jurisdiction or any applicable law that has the effect of enjoining, making illegal or otherwise prohibiting consummation of the merger;

 

   

subject to certain materiality and other qualifiers, the accuracy of the representations and warranties of the other party;

 

   

performance in all material respects by the other party of its obligations under the merger agreement; and

 

   

receipt by each party of a certificate signed on behalf of the other party by an executive officer certifying that certain of these conditions have been satisfied.

In addition, the obligations of AbbVie and Merger Sub to consummate the merger are also subject to (i) the absence of any effect, change, event, development or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect on Soliton (which term is described in the section entitled “The Merger Agreement—Representations and Warranties”) that is continuing as of the closing date and (ii) the absence of any pending action instituted by a governmental authority of competent jurisdiction seeking any judgment (x) to prevent, prohibit or make illegal consummation of the merger or (y) prohibit or materially limit AbbVie’s ability to own, control, direct, manage or operate Soliton.

The consummation of the merger is not conditioned upon AbbVie’s receipt of financing.

Before the closing, each of Soliton and AbbVie may waive any of the conditions to its obligation to consummate the merger even though one or more of the conditions described above has not been met, except where waiver is not permissible under applicable law.

No Solicitation; Board Recommendation (see page 73)

The merger agreement requires Soliton to abide by customary “no-shop” restrictions on its ability to solicit takeover proposals from third parties and to provide non-public information to and enter into discussions or negotiations with third parties regarding takeover proposals. Notwithstanding these requirements, prior to the receipt of the Stockholder Approval, Soliton may under certain circumstances furnish information to and engage in discussions or negotiations with third parties with respect to unsolicited takeover proposals that the Board determines in good faith to be, or determines in good faith would be reasonably likely to result in, a superior proposal.

Termination of the Merger Agreement (see page 83)

The merger agreement may be terminated by the mutual written consent of AbbVie and Soliton and by either Soliton or AbbVie under certain specified circumstances, including if the merger has not been consummated on or before November 8, 2021 (the “outside date”), subject to the ability of AbbVie to extend the outside date up to May 8, 2022.



 

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Termination Fees; Effect of Termination (see page 84)

If the merger agreement is terminated in certain circumstances described under “The Merger Agreement—Soliton Termination Fee” beginning on page 84 and “The Merger Agreement—AbbVie Additional Payments and Termination Fee” beginning on page 85:

 

   

Soliton may be obligated to pay AbbVie a termination fee of $18,625,000; or

 

   

AbbVie may be obligated to pay Soliton a termination fee of up to $20 million.

Market Price of Common Stock and Dividend Information (see page 103)

The closing price of Soliton common stock on the NASDAQ on May 7, 2021, the last trading day prior to the announcement of the merger agreement, was $18.00 per share. The closing price of Soliton common stock on the NASDAQ on June 14, 2021, the last trading day before the date of this proxy statement was $22.33 per share.

Since its IPO, Soliton has not paid any dividends on its common stock. Under the terms of the merger agreement, Soliton is prohibited from declaring, establishing a record date for, setting aside for payment or paying any dividends on, or making any other distributions in respect of, its capital stock or other equity or voting interests between the date of the merger agreement and the effective date.

Delisting and Deregistration of Shares of Common Stock (see page 63)

Upon completion of the merger, the shares of Soliton common stock currently listed on the NASDAQ will cease to be listed and will be deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Effects on Soliton if the Merger is not Completed (see page 14)

If the merger proposal does not receive the required Stockholder Approval, or if the merger is not completed for any other reason, Soliton’s stockholders will not receive any payment for their common stock in connection with the merger. Instead, Soliton will remain an independent public company, Soliton common stock will continue to be listed and traded on the NASDAQ, Soliton common stock will continue to be registered under the Exchange Act and Soliton’s stockholders will continue to own their Soliton common stock and continue to be subject to the same general risks and opportunities as they currently are with respect to ownership of Soliton common stock.

If the merger is not completed, there is no assurance as to the effect of these risks and opportunities on the future value of your common stock, including the risk that the market price of the Soliton common stock may decline to the extent that the current market price of the Soliton common stock reflects a market assumption that the merger will be completed. If the merger is not completed, there is no assurance that any other transaction acceptable to Soliton will be offered or that the business, operations, financial condition, earnings or prospects of Soliton will not be adversely impacted. Pursuant to the merger agreement, under certain circumstances Soliton is permitted to terminate the merger agreement in order to enter into an alternative transaction. Please see the section of this proxy statement entitled “The Merger Agreement—Termination of the Merger Agreement” beginning on page 83.

Under certain circumstances, if the merger is not completed, Soliton may be obligated to pay to AbbVie a termination fee. Please see the section of this proxy statement entitled “The Merger Agreement—Soliton Termination Fee” beginning on page 84 and “The Merger Agreement—AbbVie Additional Payments and Termination Fee” beginning on page 85.



 

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Litigation Relating to the Merger (see page 63)

On June 9, 2021, Stephen Musanto filed a complaint against Soliton and the members of the Soliton board in the United States District Court for the Southern District of New York, captioned Musanto v. Soliton, Inc., et al., Case No. 1:21-cv-05088. Mr. Musanto alleges that the named directors of Soliton breached their fiduciary duties by approving the merger agreement through a flawed and unfair process and by failing to make complete and accurate disclosures regarding this process and that Soliton aided and abetted the alleged breaches. Mr. Musanto further alleges that the proxy statement omits to disclose certain facts in violation of Section 14 of the Exchange Act. Mr. Musanto seeks to enjoin or rescind the merger and requests his attorneys’ fees and damages in an unspecified amount. Soliton believes these allegations are without merit and intends to defend against them vigorously.

Questions

If you have additional questions about the merger or other matters discussed in this proxy statement after reading this proxy statement, you should contact Saratoga Proxy Consulting, LLC, Soliton’s proxy solicitation agent. The address of Saratoga Proxy Consulting, LLC is 520 8th Avenue, New York, NY 10018. You can contact Saratoga Proxy Consulting, LLC toll-free at (888) 368-0379 or via email at info@saratogaproxy.com.



 

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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER

The following questions and answers address briefly some questions you may have regarding the special meeting and the proposed merger. These questions and answers may not address all questions that may be important to you as a stockholder. For important additional information, please refer to the more detailed discussion contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to in this proxy statement.

 

Q:

Why am I receiving this proxy statement?

 

A:

You are receiving this proxy statement because you were a stockholder of record of Soliton as of the close of business on the record date for the special meeting. On May 8, 2021, Soliton entered into the merger agreement with AbbVie and Merger Sub. Pursuant to the merger agreement, if the merger is consummated, Merger Sub will be merged with and into Soliton, with Soliton surviving the merger as a wholly owned subsidiary of AbbVie.

This document serves as the proxy statement through which Soliton will solicit proxies to obtain the necessary Stockholder Approval for the consummation of the proposed merger and the other matters to be voted on at the special meeting described below under “—What is the purpose of the special meeting?”.

 

Q:

When and where will the special meeting of stockholders be held?

 

A:

The special meeting will be held at the Hilton Garden Inn Galleria located at 3201 Sage Road, Houston, TX 77056 on July 20, 2021, at 8:30 a.m., Central Time.

 

Q:

What is the purpose of the special meeting?

 

A:

At the special meeting, stockholders will consider and vote on:

 

   

a proposal to adopt the merger agreement; and

 

   

a proposal to proposal to approve one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of adoption of the merger agreement.

 

Q:

What will I receive in the merger?

 

A:

If the merger is completed, you will be entitled to receive $22.60 in cash, without interest and less any applicable withholding taxes, for each share of Soliton common stock that you own immediately prior to the effective time of the merger.

The receipt of cash pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes. Please see the section of this proxy statement entitled “Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 91 for a more detailed description of the United States federal income tax consequences of the merger. You should consult your own tax advisor for a full understanding of how the merger will affect your federal, state, local and/or non-U.S. taxes.

 

Q:

What happens if the market price of shares of Soliton common stock changes before the closing of the merger?

 

A:

No change will be made to the merger consideration of $22.60 per share of Soliton common stock as a result of a change in the market price of the Soliton common stock.

 

Q:

If the merger is completed, what will happen to Soliton equity awards?

 

A:

For information regarding the treatment of Soliton equity awards, please see “The Merger Agreement—Treatment of Equity and Equity-Based Awards” beginning on page 65.

 

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Q:

What constitutes a “quorum” for purposes of the special meeting?

 

A:

A quorum is necessary to transact business at the special meeting. Holders of a majority of all issued and outstanding shares of Soliton common stock as of the record date entitled to vote must be present in person or represented by proxy at the special meeting in order for there to be a quorum. Shares of Soliton common stock represented at the special meeting but not voted, including shares for which a stockholder directs an “abstention” from voting, will be counted as present for purposes of establishing a quorum. Because none of the proposals to be voted on at the special meeting are “routine” matters for which brokers may have discretionary authority to vote, Soliton does not expect any broker non-votes at the special meeting. Thus, if you fail to provide instructions with respect to any shares that you beneficially own through a broker, bank, trust, custodian or other nominee, such shares will not be counted for purposes of establishing a quorum (although such shares will be present for establishing a quorum if you provide instructions to the intermediary holding your shares with respect to at least one of the proposals presented in this proxy statement). If a quorum is not present in person or represented by proxy, the special meeting may be adjourned or postponed until the holders of the number of shares of Soliton common stock required to constitute a quorum are present in person or represented by proxy.

 

Q:

What is the vote required to adopt the merger agreement?

 

A:

The proposal to adopt the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of Soliton common stock as of the record date entitled to vote thereon. Abstentions and failing to provide instructions with respect to any shares you beneficially own through a broker will have the same effect as a vote AGAINST the proposal to adopt the merger agreement.

 

Q:

What is the vote required to approve the adjournment proposal?

 

A:

The adjournment proposal requires the affirmative vote of the holders of a majority of the shares of Soliton common stock represented at the special meeting and entitled to vote thereon. Assuming a quorum is present at the special meeting, abstentions will have the same effect as a vote “AGAINST” the adjournment proposal. Failing to provide instructions on the adjournment proposal with respect to any shares you beneficially own through a broker will have no effect on the outcome of the adjournment proposal.

 

Q:

When is the proposed merger expected to be completed?

 

A:

We are working toward completing the merger as promptly as possible. We currently anticipate the merger to close in the second half of 2021, but we cannot be certain when or if the conditions of the merger will be satisfied or (if permissible under applicable law) waived. The merger cannot be completed until the conditions to closing are satisfied or (if permissible under applicable law) waived, including the adoption of the merger agreement by the holders of Soliton common stock at the special meeting and the receipt of certain regulatory approvals.

 

Q:

Who is entitled to vote at the special meeting?

 

A:

Only holders of record of Soliton common stock at the close of business on June 9, 2021, the record date for the special meeting, are entitled to receive notice of, and to vote at, the special meeting or any adjournment or postponement of the special meeting. At the close of business on the record date, 21,596,544 shares of Soliton common stock were issued and outstanding and held by 73 holders of record. Each share of Soliton common stock is entitled to one vote on each matter submitted to a vote at the special meeting.

 

Q:

Who may attend the special meeting?

 

A:

Stockholders of record as of the close of business on June 9, 2021, or their duly appointed proxies, may attend the special meeting. “Street name” holders (those whose shares are held through a broker, bank, trust

 

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  company or other nominee) should bring a copy of an account statement reflecting their ownership of Soliton common stock as of the record date. If you are a “street name” holder and you wish to vote at the special meeting, you must also bring a legal proxy from the record holder (your broker, bank, trust company or other nominee) of the shares of Soliton common stock authorizing you to vote at the special meeting.

 

Q:

How does the Board recommend that I vote?

 

A:

The Board recommends a vote “FOR” the merger proposal and “FOR” the adjournment proposal.

For a discussion of the factors that the Board considered in determining to recommend the approval of the merger agreement, please see the section of this proxy statement entitled “The Merger—Recommendation of the Board and Soliton’s Reasons for the Merger” beginning on page 37. In addition, in considering the recommendation of the Board with respect to the merger agreement, you should be aware that some of Soliton’s directors and executive officers have interests that may be different from, or in addition to, the interests of Soliton’s stockholders generally. Please see the section of this proxy statement entitled “The Merger—Interests of Directors and Executive Officers in the Merger” beginning on page 56.

 

Q:

Who is soliciting my vote?

 

A:

The Board is soliciting your proxy, and Soliton will bear the cost of soliciting proxies.

 

Q:

What do I need to do now?

 

A:

Carefully read and consider the information contained in this proxy statement, including its annexes.

If you are a holder of record, in order for your shares to be represented at the special meeting:

 

   

you can attend the special meeting in person;

 

   

you can submit a proxy through the Internet or by telephone by following the instructions included on your proxy card; or

 

   

you can indicate on the enclosed proxy card how you would like to vote and return the proxy card.

If you hold your shares in “street name,” in order for your shares to be represented at the special meeting, you should instruct your broker, bank, trust company or other nominee as to how to vote your shares by following the directions provided to you by your broker, bank, trust company or other nominee.

 

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 Soliton 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 Soliton common stock is called a “proxy card.”

 

Q:

How do I vote if my shares are registered directly in my name?

 

A:

If you are a record holder of Soliton common stock, you may vote in person at the special meeting or by proxy. Whether or not you intend to attend the special meeting, we encourage you to submit a proxy to vote your shares now, online, by phone or proxy card to ensure that your vote is counted. For more detailed instructions on how to submit a proxy to vote your shares using one of these methods, please see the section of this proxy statement entitled “The Special Meeting—Voting of Proxies” beginning on page 19.

Your failure to vote will have the same effect as a vote “AGAINST” the merger proposal.

 

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Q:

How do I vote my shares if they are held in the name of my broker (“street name”)?

 

A:

If you hold your shares in a stock brokerage account or if your shares are held by a broker, bank, trust company or other nominee (that is, in “street name”), you must follow the directions from your broker, bank, trust company or other nominee provided to you in order to vote. Please check the voting form used by your broker, bank, trust company or other nominee. If you do not provide your broker, bank, trust company or other nominee with instructions, your shares of Soliton common stock will not be counted for purposes of determining a quorum at the special meeting and such shares will not be voted on any proposal at the special meeting, which will have the same effect as a vote “AGAINST” the merger proposal.

Please note that you may not vote shares held in “street name” by returning a proxy card directly to Soliton or by voting in person at the special meeting unless you provide a legal proxy, which you must obtain from your broker, bank, trust company or other nominee.

 

Q:

What will happen if I fail to submit a proxy or I abstain from voting?

 

A:

If you fail to submit a proxy or fail to instruct your broker, bank, trust company or other nominee to vote, it will have the effect of a vote against the merger proposal, but, assuming a quorum is present at the special meeting, will have no effect on the adjournment proposal. If you mark your proxy to abstain or provide voting instructions to abstain, it will have the effect of a vote against the merger proposal and the adjournment proposal.

 

Q:

How can I revoke my proxy?

 

A:

If you have already submitted your proxy by Internet, telephone or by returning your proxy card, you may revoke a properly executed or authorized proxy by: (a) submitting another proxy by Internet or telephone subsequent to the date shown on the previously executed and delivered proxy or the date of a prior proxy submitted by Internet or telephone (and prior to the special meeting), (b) mailing a later-dated, properly executed and delivered proxy to our Corporate Secretary, which is received prior to the special meeting, or (c) mailing a written revocation to our Corporate Secretary, which is received prior to the special meeting. Stockholders of record may also revoke their proxies by attending the special meeting and voting in person. If stockholders of record only attend the special meeting but do not vote, their proxies will not be revoked.

If your shares are held in “street name” by your broker, bank, trust company or other nominee, you should contact your broker, bank, trust company or other nominee to change your vote or revoke your proxy.

 

Q:

Do I need to do anything with my stock certificates now?

 

A:

No. Promptly after the effective time of the merger, each holder of a certificate representing any shares of Soliton common stock that have been converted into the right to receive the merger consideration will be sent a letter of transmittal describing the procedure for surrendering their shares in exchange for the merger consideration. If you hold your shares in certificated form, you will receive your cash payment after the paying agent receives your share certificates and any other documents requested in the instructions. You should not return your share certificates with the enclosed proxy card, and you should not forward your share certificates to the paying agent without a letter of transmittal. If you hold Soliton common stock in non-certificated book-entry form, you will not be required to deliver a share certificate, and you will receive your cash payment after the paying agent receives the documents requested in the instructions.

 

Q:

What happens if the merger is not completed?

 

A:

If our stockholders do not approve the merger proposal, or if the merger is not completed for any other reason, you will not receive any payment for your shares of Soliton common stock in connection with the merger. Instead, Soliton will remain an independent public company and stockholders will continue to own

 

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  their Soliton common stock. The Soliton common stock will continue to be registered under the Exchange Act and listed and traded on the NASDAQ. Under certain circumstances, if the merger is not completed, Soliton may be obligated to pay to AbbVie a termination fee. Please see the section of this proxy statement entitled “The Merger Agreement—Soliton Termination Fee” beginning on page 84 and “The Merger Agreement—AbbVie Additional Payments and Termination Fee” beginning on page 85.

 

Q:

What effect will the merger have on Soliton?

 

A:

If the merger is consummated, Merger Sub will be merged with and into Soliton, and Soliton will continue to exist following the merger as a subsidiary of AbbVie. Following such consummation of the merger, the Soliton common stock will no longer be traded on the NASDAQ or any other public market, and the registration of the Soliton common stock under the Exchange Act will be terminated.

 

Q:

What happens if I sell my shares of common stock before the special meeting?

 

A:

The record date for the special meeting is earlier than the expected closing date of the merger. If you own shares of Soliton common stock as of the close of business on the record date but transfer your shares prior to the special meeting, you will retain your right to vote at the special meeting, but the right to receive the merger consideration will pass to the person who holds your shares as of immediately prior to the effective time of the merger.

 

Q:

May I exercise dissenters’ rights or rights of appraisal in connection with the merger?

 

A:

Yes. Shares of Soliton common stock held by stockholders who have not voted such shares in favor of the adoption of the merger agreement and have properly exercised appraisal rights under Section 262 of the DGCL (and have not withdrawn such exercise or lost such rights) will not be converted into the right to receive the merger consideration, but will instead be converted into the right to receive payment in cash for the fair value of their shares of Soliton common stock as determined in accordance with Section 262 of the DGCL. The fair value of shares of Soliton common stock as determined in accordance with Section 262 of the DGCL may be more or less than (or the same as) the merger consideration. Stockholders who wish to exercise appraisal rights must comply fully with all applicable requirements of Section 262 of the DGCL, which is summarized in this proxy statement and attached as Annex E to this proxy statement. Failure to follow exactly the procedures specified under Section 262 of the DGCL may result in the loss of appraisal rights. Because of the complexity of Section 262 of the DGCL relating to appraisal rights, if you are considering exercising your appraisal rights we encourage you to seek the advice of your own legal counsel.

 

Q:

How can I obtain additional information about Soliton?

 

A:

We will provide copies of this proxy statement and our Annual Report on Form 10-K for the year ended December 31, 2020, without charge to any stockholder who makes a written request to our Corporate Secretary at Soliton, Inc., 5304 Ashbrook Drive, Houston, TX 77081, Attn: Corporate Secretary. Our Annual Report on Form 10-K and other SEC filings also may be accessed at www.sec.gov or on the Investors section of our website at www.soliton.com. Our website address is provided as an inactive textual reference only. The information provided on or accessible through our website is not part of this proxy statement and is not incorporated in this proxy statement by this or any other reference to our website provided in this proxy statement.

 

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Q:

Who can help answer my questions?

 

A:

If you have questions about the merger or the other matters to be voted on at the special meeting or desire additional copies of this proxy statement or additional proxy cards or otherwise need assistance voting, you should contact:

Saratoga Proxy Consulting, LLC

520 8th Avenue

New York, NY 10018

Stockholders may call toll-free: (888) 368-0379

info@saratogaproxy.com

or

Soliton, Inc.

5304 Ashbrook Drive

Houston, TX 77081

(844) 705-4866

Attn: Corporate Secretary

 

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This proxy statement contains not only historical information, but also forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements often include the words “may,” “might,” “should,” “would,” “could,” “expect,” “plan,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “continue,” and words of similar substance. A number of important factors could cause actual results of Soliton to differ materially from those indicated by such forward-looking statements. These factors include, but are not limited to, (i) the risk that the proposed merger with AbbVie may not be completed in a timely manner or at all, which may adversely affect Soliton’s business and the price of its common stock; (ii) the failure to receive, on a timely basis or otherwise, the required Stockholder Approval; (iii) the possibility that competing offers or acquisition proposals for Soliton will be made; (iv) the possibility that any or all of the various conditions to the consummation of the merger may not be satisfied or waived, including the failure to receive any required regulatory approvals from any applicable governmental entities (or any conditions, limitations or restrictions placed on such approvals); (v) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement, including in circumstances which would require Soliton to pay a termination fee or other expenses; (vi) the effect of the announcement or pendency of the transactions contemplated by the merger agreement on Soliton’s ability to retain and hire key personnel, its ability to maintain relationships with its customers, suppliers and others with whom it does business, or its operating results and business generally; (vii) risks related to diverting management’s attention from Soliton’s ongoing business operations; (viii) the risk that stockholder litigation in connection with the transactions contemplated by the merger agreement may result in significant costs of defense, indemnification and liability and (ix) the risk factors detailed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and of our Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2020, and other risk factors identified herein or from time to time in our periodic filings with the SEC.

Soliton assumes no obligation to update or revise publicly the information in this communication, whether as a result of new information, future events or otherwise, except as otherwise required by law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof. There can be no assurance that the merger will in fact be completed.

 

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THE SPECIAL MEETING

This proxy statement is being provided to the stockholders of Soliton in connection with the solicitation of proxies by the Board for use at the special meeting to be held at the time and place specified below, and at any properly convened meeting following an adjournment or postponement thereof. This proxy statement provides stockholders of Soliton with the information about the special meeting and should be read carefully in its entirety.

Date, Time and Place

The special meeting is scheduled to be held at the Hilton Garden Inn Galleria located at 3201 Sage Road, Houston, TX 77056 on July 20, 2021, at 8:30 a.m., Central Time.

Purpose of the Special Meeting

At the special meeting, stockholders will be asked to consider and vote on the following proposals:

 

   

the merger proposal; and

 

   

the adjournment proposal.

Recommendation of the Soliton Board

After careful consideration, the Board, based in party upon the unanimous recommendation of the Strategic Alternatives Committee, determined to adopt, authorize and approve the merger agreement and recommend the adoption of the merger agreement by the holders of Soliton common stock. Accordingly, the Board recommends a vote “FOR” the proposal to adopt the merger agreement and a vote “FOR” the adjournment proposal.

The Board believes that the merger agreement and the merger are advisable, fair to and in the best interests of Soliton and its stockholders. For a discussion of the material factors that the Board considered in determining to recommend the approval of the merger agreement, please see the section of this proxy statement entitled “The Merger—Recommendation of the Board and Soliton’s Reasons for the Merger” beginning on page 37.

Record Date; Stockholders Entitled to Vote

Only holders of record of Soliton common stock at the close of business on June 9, 2021, the record date for the special meeting, are entitled to receive notice of, and to vote at, the special meeting or any adjournment or postponement of the special meeting. At the close of business on the record date, 21,596,544 shares of Soliton common stock were issued and outstanding and held by 73 holders of record. Each share of Soliton common stock is entitled to one vote on each matter submitted to a vote at the special meeting.

If you own shares of Soliton common stock that are registered in the name of someone else, such as a broker, bank, trust company or other nominee, you are not a holder of record and instead hold your shares in “street name.” If you hold shares in “street name,” you will need to direct the applicable organization to vote those shares or obtain authorization from it and vote the shares yourself at the special meeting, as described below.

Quorum

A quorum is necessary to transact business at the special meeting. Holders of a majority of all issued and outstanding shares of Soliton common stock as of the record date entitled to vote must be present in person or represented by proxy at the special meeting in order for there to be a quorum. Shares of Soliton common stock represented at the special meeting but not voted, including shares for which a stockholder directs an “abstention” from voting, will be counted as present for purposes of establishing a quorum. Because none of the proposals to

 

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be voted on at the special meeting are “routine” matters for which brokers may have discretionary authority to vote, Soliton does not expect any broker non-votes at the special meeting. Thus, if you fail to provide instructions with respect to any shares that you beneficially own through a broker, bank, trust, custodian or other nominee, such shares will not be counted for purposes of establishing a quorum (although such shares will be present for establishing a quorum if you provide instructions to the intermediary holding your shares with respect to at least one of the proposals presented in this proxy statement). If a quorum is not present in person or represented by proxy, the special meeting may be adjourned or postponed until the holders of the number of shares of Soliton common stock required to constitute a quorum are present in person or represented by proxy.

Required Vote

Assuming a quorum is present at the special meeting, adoption of the merger agreement will require the affirmative vote of the holders of a majority of the shares of Soliton common stock outstanding as of the record date for the special meeting. If you fail to vote, if you fail to provide instructions to your broker, bank or other nominee to vote on your behalf, or if you abstain from voting, the effect will be the same as if you had voted against the adoption of the merger agreement.

Approval of one or more adjournments of the special meeting, if necessary or appropriate, including adjournments to permit further solicitation of proxies in favor of adoption of the merger agreement, will require the affirmative vote of the holders of a majority of the shares of Soliton common stock present in person or represented by proxy at the special meeting and entitled to vote on this proposal. An abstention from voting on this proposal will have the same effect as a vote against the proposal. If you fail to submit a proxy and do not attend the special meeting in person, or if you fail to provide instructions to your broker, bank or other nominee to vote on your behalf, your shares will not affect whether the adjournment proposal is approved.

Voting in Person

If you plan to attend the special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note, however, that if your shares are held in “street name,” and you wish to vote at the special meeting, you must bring to the special meeting a legal proxy executed in your favor from the record holder of the shares (your broker, bank, trust company or other nominee) authorizing you to vote at the special meeting.

In addition, please be prepared to provide proper identification, such as a driver’s license or passport. If you hold your shares in “street name,” you will need to provide proof of ownership, such as a recent account statement or letter from your broker, bank, trust company or other nominee proving ownership on the record date, along with proper identification. Stockholders will not be allowed to use cameras, recording devices or other similar electronic devices at the meeting.

Voting of Proxies

If you are a holder of record of Soliton common stock as of the record date for the special meeting there are four ways to have your shares voted:

 

   

By Internet—If you received a printed copy of the proxy materials, follow the instructions on your proxy card.

 

   

By Telephone—If you received a printed copy of the proxy materials, follow the instructions on your proxy card.

 

   

By Mail—If you received a printed copy of the proxy materials, complete, sign, date, and mail your proxy card in the enclosed, postage-paid envelope.

 

   

In Person—You may vote in person by written ballot at the special meeting.

 

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You will need the control number included on your proxy card if you submit a proxy to vote your shares by Internet or telephone.

Your vote is important. Accordingly, please mark, sign, date and return the enclosed proxy card or submit a proxy via the Internet or by telephone whether or not you plan to attend the special meeting in person.

If a properly executed proxy is returned without an indication as to how the shares of common stock represented are to be voted with regard to a particular proposal, the common stock represented by the proxy will be voted “FOR” such proposal. All shares represented by properly executed proxies received (including proxies received via the Internet or by telephone) in time for the special meeting will be voted at the meeting in the manner specified by the stockholder giving those proxies.

Shares Held in “Street Name”

If you hold your shares in a stock brokerage account or if your shares are held by a broker, bank, trust company or other nominee (that is, in “street name”), you must provide the record holder of your shares with instructions on how to vote your shares if you wish them to be counted. Please follow the voting instructions provided by your broker, bank, trust company or other nominee. Please note that you may not vote shares held in “street name” by returning a proxy card directly to Soliton or by voting in person at the special meeting unless you provide a legal proxy, which you must obtain from your broker, bank, trust company or other nominee. Further, brokers who hold shares of Soliton common stock on behalf of their customers may not give a proxy to Soliton to vote those shares without specific instructions from their customers.

If you are a stockholder holding your shares in “street name” and you do not instruct your broker, bank, trust company or other nominee on how to vote your shares, your broker, bank, trust company or other nominee cannot vote your shares, which will have the same effect as a vote against the merger proposal. If you do not instruct your broker on how to vote your shares, it will have no effect on the adjournment proposal.

Revocation of Proxies

If you have already submitted your proxy by Internet, telephone or by returning your proxy card, you may revoke a properly executed or authorized proxy by:

 

   

submitting another proxy by Internet or telephone subsequent to the date shown on the previously executed and delivered proxy or the date of a prior proxy submitted by Internet or telephone (and prior to the special meeting);

 

   

mailing a later-dated, properly executed and delivered proxy to our Corporate Secretary, which is received prior to the special meeting; or

 

   

mailing a written revocation to our Corporate Secretary, which is received prior to the special meeting.

Stockholders of record may also revoke their proxies by attending the special meeting and voting in person. If stockholders of record only attend the special meeting but do not vote, their proxies will not be revoked.

If your shares are held in “street name” by your broker, bank, trust company or other nominee, you should contact your broker, bank, trust company or other nominee to change your vote or revoke your proxy.

Adjournments and Postponements

Although it is not currently expected, the special meeting may be adjourned or postponed. Under the merger agreement, Soliton may adjourn or postpone the special meeting in the following cases:

 

   

if Soliton is required to postpone or adjourn the special meeting by applicable law;

 

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if, as of the time for which the special meeting is originally scheduled, Soliton has not received proxies representing a sufficient number of shares of Soliton common stock to obtain the Stockholder Approval;

 

   

if, as of the time for which the special meeting is originally scheduled, there are insufficient shares of Soliton common stock represented (in person or by proxy) and voting to constitute a quorum necessary to conduct the business of the special meeting; or

 

   

after consultation with AbbVie, to the extent necessary to ensure that any required supplement or amendment to this proxy statement which the Board has determined in good faith after consultation with outside counsel is necessary under applicable law is provided to Soliton’s stockholders within a reasonable amount of time prior to the special meeting;

provided that other than with respect to an adjournment or postponement of the special meeting required by applicable law, Soliton may not adjourn or postpone the special meeting to a date that is more than 30 calendar days after the date the special meeting was originally scheduled without the consent of AbbVie.

Any adjournment to a date not more than 30 days after the date originally fixed for the special meeting may be made without notice, other than by an announcement made at the special meeting of the time and place of the adjourned meeting. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow stockholders who have already sent in their proxies to revoke them at any time before voting occurs at the special meeting. See “Proposal 2: Approval of Authority to Adjourn the Special Meeting” on page 100 for more information about the proposal relating to adjournments of the special meeting.

Solicitation of Proxies; Payment of Solicitation Expenses

Soliton is soliciting proxies for the special meeting from Soliton stockholders. Soliton will bear the entire cost of soliciting proxies from Soliton stockholders, including the expenses incurred in connection with the preparation of the proxy statement and its filing with the SEC. In addition to this mailing, Soliton’s directors, officers and employees may solicit proxies by telephone, by facsimile, by mail, over the Internet or in person. They will not be paid any additional amounts for soliciting proxies. Arrangements also will be made with brokerage firms and other custodians, nominees and fiduciaries to forward proxy solicitation materials to the beneficial owners of Soliton common stock held of record by those persons, and Soliton will reimburse these brokerage firms, custodians, nominees and fiduciaries for related, reasonable out-of-pocket expenses they incur.

Soliton has engaged Saratoga Proxy Consulting, LLC to assist in the solicitation of proxies for the special meeting and will pay Saratoga Proxy Consulting, LLC a fee of approximately $40,000, plus reimbursement of out-of-pocket expenses. The address of Saratoga Proxy Consulting, LLC is 520 8th Avenue, New York, NY 10018. You can contact Saratoga Proxy Consulting, LLC toll-free at (888) 368-0379 or via email at info@saratogaproxy.com.

A list of stockholders entitled to vote at the special meeting will be open for examination by any Soliton stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of ten days before the meeting at Soliton’s principal executive offices at 5304 Ashbrook Drive, Houston, TX 77081, and at the time and place of the special meeting during the entire time of the special meeting.

Assistance

If you need assistance in completing your proxy card or have questions regarding the special meeting, please contact Soliton’s proxy solicitor, Saratoga Proxy Consulting, LLC toll-free at (888) 368-0379.

 

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THE COMPANIES

Soliton, Inc.

Soliton is a medical technology company focused on developing and commercializing products utilizing its proprietary designed acoustic shockwave technology platform referred to as RAP. Soliton is a pre-revenue stage company with its first product, RESONIC, preparing for launch for the removal of tattoos and the reduction of cellulite. Soliton’s RESONIC console uses rapid pulses of designed acoustic shockwaves to disrupt cellular structures in the dermal and subdermal tissue. The uniqueness of Soliton’s designed shockwave allows Soliton to target the differential in stiffness between cellular structures and generate a shearing effect that Soliton believes represents a platform technology potentially useful in tattoo removal, cellulite treatment, fibrotic scar treatment and other indications. Soliton believes the high repetition rate, rapid rise and fall of the wave, and significant peak pressure delivered in a non-focused manner make its shockwave significantly different from other available shockwave technologies. Importantly, Soliton’s technology allows the disruption of targeted structures within the skin with only minimal discomfort and without additional treatment-related downtime for tattoo removal or any downtime for cellulite treatment.

Soliton’s common stock is listed and traded on the NASDAQ under the symbol “SOLY.”

Soliton’s principal executive offices are located at 5304 Ashbrook Drive, Houston, TX 77081 and its telephone number is (844) 705-4866. Soliton’s Internet website address is www.soliton.com. The information provided on or accessible through Soliton’s website is not part of this proxy statement and is not incorporated in this proxy statement by this or any other reference to Soliton’s website provided in this proxy statement.

AbbVie Inc.

AbbVie is a global, research-based biopharmaceutical company. AbbVie uses its expertise, dedicated people and unique approach to innovation to develop and market advanced therapies that address some of the world’s most complex and serious diseases. Allergan Aesthetics, an AbbVie company, develops, manufactures and markets a portfolio of leading aesthetics brands and products.

AbbVie’s common stock is listed and traded on the NYSE under the symbol “ABBV.”

AbbVie’s principal executive offices are located at 1 North Waukegan Road, North Chicago, Illinois 60064-6400; its telephone number is (847) 932-7900; and its Internet website address is www.abbvie.com. The information provided on or accessible through AbbVie’s website is not part of this proxy statement and is not incorporated in this proxy statement by this or any other reference to its website provided in this proxy statement.

Scout Merger Sub, Inc.

Merger Sub, a wholly-owned subsidiary of AbbVie, is a Delaware corporation that was formed on April 29, 2021, for the purpose of effecting the merger. Merger Sub has not engaged in any business to date except for activities incidental to its incorporation and activities undertaken in connection with the merger and the other transactions contemplated by the merger agreement. Upon the terms and subject to the conditions of the merger agreement, Merger Sub will be merged with and into Soliton, with Soliton surviving the merger as a wholly-owned subsidiary of AbbVie.

The principal executive offices of Merger Sub are located at 1 North Waukegan Road, North Chicago, Illinois 60064-6400, and its telephone number is (847) 932-7900.

 

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PROPOSAL 1: ADOPTION OF THE MERGER AGREEMENT

As discussed below, stockholders are being asked to consider and vote on a proposal to adopt the merger agreement. You should read this proxy statement carefully and in its entirety for more detailed information concerning the merger agreement and the merger. In particular, you should read carefully and in its entirety the merger agreement, which is attached as Annex A to this proxy statement.

The Soliton Board unanimously recommends that stockholders vote “FOR” the merger proposal.

If you return a properly executed proxy (including proxies received via the Internet or by telephone), but do not indicate instructions on your proxy, your shares of common stock represented by such proxy will be voted “FOR” the merger proposal.

Approval of the merger proposal requires the affirmative vote of the holders of a majority of the outstanding shares of Soliton common stock as of the record date entitled to vote thereon.

Your failure to vote, or failure to instruct your broker, bank, trust company or other nominee to vote, will have the same effect as a vote “AGAINST” the merger proposal. Abstentions and failing to provide instructions with respect to any shares you beneficially own through a broker will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement.

 

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THE MERGER

The following is a discussion of the merger, including the process undertaken by Soliton, its Board and the Strategic Alternatives Committee, or SAC, in identifying and determining whether to engage in the proposed transaction. The discussion of the merger in this proxy statement is qualified in its entirety by reference to the merger agreement, a copy of which is attached to this proxy statement as Annex A and which is incorporated by reference into this proxy statement.

Overview

Soliton is seeking the adoption by its stockholders of the merger agreement. Under the terms of the merger agreement, subject to the satisfaction or waiver (if permissible under applicable law) of specified conditions more fully described in the merger agreement, Merger Sub will be merged with and into Soliton, with Soliton surviving the merger as a wholly owned subsidiary of AbbVie. The Board has unanimously adopted, authorized and approved the merger agreement and unanimously recommends that Soliton’s stockholders vote to adopt the merger agreement.

Common Stock. Upon completion of the merger, each issued and outstanding share of Soliton common stock will automatically be canceled and will cease to exist and will be converted into the right to receive $22.60 in cash, without interest and subject to any applicable withholding taxes (other than (i) shares of Soliton common stock where the holder has properly exercised appraisal rights under Section 262 of the DGCL (and has not withdrawn such exercise or lost such rights) and (ii) shares of Soliton common stock owned by Soliton, AbbVie or Merger Sub).

Options. Immediately prior to the effective time of the merger, each option to purchase shares of Soliton common stock, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time of the merger will be cancelled, extinguished and of no further force or effect and automatically converted into the right to receive, as the sole consideration for each share of Soliton common stock underlying such option, an amount in cash, without interest and subject to any applicable withholding tax, equal to the excess of (i) the merger consideration over (ii) the per share exercise price that would be due in cash upon exercise of such option.

Restricted Stock Units. Immediately prior to the effective time of the merger, each restricted stock unit award that is outstanding immediately prior to the effective of the merger, whether vested, unvested or otherwise subject to forfeiture, will be cancelled, extinguished and of no further force or effect and automatically converted into the right to receive, as the sole consideration for each share of Soliton common stock underlying such restricted stock unit award, an amount in cash, without interest and subject to any applicable withholding tax, equal to the merger consideration.

Restricted Shares. Immediately prior to the effective time of the merger, each share of Soliton common stock subject to vesting and/or forfeiture conditions that is outstanding immediately prior to the effective time of the merger will automatically vest in full and become free of such restrictions and thereafter will terminate and be converted into the right to receive, as the sole consideration in respect of such terminated restricted share of Soliton common stock, an amount in cash, without interest and subject to any applicable withholding tax, equal to the merger consideration.

Warrants. At the effective time of the merger, each warrant to purchase shares of Soliton common stock, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time of the merger will be cancelled and automatically converted into the right to receive an amount in cash, without interest and subject to any applicable withholding tax, equal to the excess of (i) the number of shares of Soliton common stock subject to such warrant, multiplied by the merger consideration over (ii) the number of shares of Soliton common stock subject to such warrant, multiplied by the exercise price of such warrant.

 

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Background of the Merger

As part of the ongoing oversight of Soliton’s business, the Board and Soliton’s senior management regularly review and discuss Soliton’s recent performance, its strategic business plan and its growth prospects with the dual goals of (a) developing its Rapid Acoustic Pulse (“RAP”) device and ultimately launching it successfully into the market and (b) maximizing stockholder value.

In accordance with these dual goals, and before the commencement in November 2020 of the broader strategic outreach described below, Soliton from time to time engaged in discussions with other companies in the aesthetics industry regarding their technology, clinical trial results, commercial progress and a variety of possible business opportunities. These business opportunities ranged from commercial or partnering arrangements to possible business combination transactions and included discussions between Soliton and Allergan plc (including ZELTIQ Aesthetics, Inc., or “Zeltiq,” before its acquisition by Allergan plc). Soliton engaged in these discussions, which other than as described below were brief and preliminary, as part of its ongoing evaluation of business opportunities.

With respect to discussions with Allergan, the Board and Soliton’s senior management have considered a variety of potential transaction structures and relationships, including an investment by Allergan in Soliton and various licensing arrangements for Soliton’s technology, including a license for the treatment of cellulite, as well as Allergan’s possible purchase of Soliton in its entirety. These discussions were led on behalf of Soliton by Walter V. Klemp, Soliton’s Executive Chairman, Christopher Capelli, M.D., Soliton’s Chief Science Officer (and its President and Chief Executive Officer until November 2, 2020 when Brad Hauser was appointed President and Chief Executive Officer), and Lori Bisson, Soliton’s Executive Vice President and Chief Financial Officer. After Mr. Hauser became Soliton’s President and Chief Executive Officer in November 2020, Mr. Hauser took a leading role in the discussions between Soliton and AbbVie, which had acquired Allergan in May 2020.

Mr. Hauser joined the Board in May 2018. The Board believed that Mr. Hauser’s experience in, among other things, commercial launch of an aesthetics device would be helpful to the Board as Soliton pursued its business plan to develop its RAP device and ultimately launch it into the market. Before Mr. Hauser joined the Board, he was a senior executive at Zeltiq and then Allergan. In the normal course of those roles, Mr. Hauser participated in various interactions between Soliton and Zeltiq/Allergan.

Mr. Hauser recused himself from all Board discussions regarding Soliton’s engagement with Allergan and then AbbVie from the beginning of his service on the Board of Soliton in May 2018 until he was appointed as Soliton’s President and Chief Executive Officer in November 2020. On February 1, 2019, the Board formalized these arrangements to exclude Mr. Hauser from any discussions between Soliton and Allergan, from any access to Soliton’s non-public confidential cellulite data and from any other entity’s interest in Soliton’s technology. (The foregoing arrangements ended when Mr. Hauser was appointed Soliton’s President and Chief Executive Officer effective November 2, 2020.)

On February 19, 2019, Soliton became a public company when its IPO became effective.

In 2018 and 2019, the interactions between Soliton and Allergan generally focused on educating Allergan regarding Soliton’s RAP device, related clinical trials and its clinical indications, including improvement of cellulite. However, during the period from February 2019 until the last week of June 2019, Allergan conducted due diligence on Soliton pursuant to an existing confidentiality agreement that had previously been entered into by Soliton and Zeltiq (which, as noted above, was subsequently acquired by Allergan and became its wholly-owned subsidiary). The Board believed that Allergan intended to make a proposal to acquire Soliton or enter into an agreement for a cellulite-only license. Given its expectations that a fundamental transaction might occur, the Board engaged in discussions with several potential financial advisors, including Guggenheim Securities, although the Board ultimately did not retain a financial advisor during that period. At a Board meeting on May 9,

 

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2019, the Board approved the engagement of Hogan Lovells U.S. LLP (“Hogan Lovells”) to represent Soliton in a potential acquisition or licensing transaction, and management engaged Hogan Lovells in accordance with this authority. Ultimately, Allergan did not make a proposal to acquire Soliton at that time.

On June 25, 2019, AbbVie Inc. and Allergan announced that they had entered into a definitive transaction agreement under which AbbVie would acquire Allergan.

Notwithstanding that Allergan did not propose a strategic licensing or combination transaction with Soliton in June 2019, the parties decided to further evaluate Soliton’s RAP device in a proof-of-concept study, which culminated in an additional round of testing at a third-party testing site on July 22, 2019.

On October 16, 2019 in a videoconference, members of Soliton’s senior management spoke with an Allergan representative to discuss the results of the July 2019 proof-of-concept study. Representatives of Soliton and Allergan engaged in numerous discussions via email from mid-October to late November 2019 regarding clinical trial results.

On January 13, 2020, Mr. Klemp, Mr. Cappelli and Ms. Bisson met at an industry conference with three senior Allergan executives, and the Soliton executives provided a brief update on the clinical progress of Soliton’s cellulite study and reviewed the results from the proof-of-concept clinical trial for the treatment of keloid and hypertrophic scars. The Soliton executives reported this conversation to the Board at its meeting on January 24, 2020.

On March 1, 2020, Mr. Klemp informed a senior Allergan executive that Soliton had obtained final pivotal data from a clinical trial of the RAP device focused on the treatment of cellulite, noting that the data would be presented at an upcoming dermatology conference on March 21, 2020. Mr. Klemp suggested that the parties meet to review the data and related photographs.

On March 13, 2020, Soliton and Allergan met via videoconference, and Soliton summarized the initial clinical results for the treatment of cellulite.

On May 8, 2020, AbbVie completed its acquisition of Allergan.

In May 2020, Soliton engaged, with the assistance of Hogan Lovells, the law firm of Richards Layton & Finger, PA to serve as special Delaware counsel to the Board.

From early June 2020 until July 28, 2020, Soliton and AbbVie planned for a videoconference presentation by Soliton to a group of AbbVie executives regarding Soliton’s RAP technology and clinical results related to cellulite. The planning included Soliton making clinical data available in a virtual data room.

In mid-August 2020, Soliton arranged, at AbbVie’s request, due diligence calls with clinicians who had performed the recent clinical study. Although Soliton had previously entered into a confidentiality agreement with Zeltiq (now owned by Allergan), given that AbbVie had subsequently acquired Allergan, AbbVie delivered the first draft of a new form of confidentiality agreement to Soliton on August 20, 2020. After several weeks of negotiation and exchanges of revised drafts, AbbVie and Soliton executed the confidentiality agreement on October 14, 2020.

On September 25, 2020, the Board held a meeting via videoconference with all members present. Also present at the invitation of the Board were Ms. Bisson, a representative of Hogan Lovells, and a representative of Schiff Hardin, LLP, corporate counsel to the Company (“Schiff Hardin”). After Mr. Hauser left the meeting, the Board discussed Soliton’s ongoing dialogue with AbbVie. Members of Soliton senior management reviewed the status of Soliton’s interactions with AbbVie, including reviewing the diligence being conducted by AbbVie and the expected timeframe within which they understood AbbVie would determine whether to proceed towards further discussions regarding a potential strategic transaction with Soliton. The representative of Hogan Lovells reviewed with the members of the Board their fiduciary duties and obligations.

 

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The representative of Hogan Lovells then reviewed the potential benefits of establishing a committee of the Board to oversee, on behalf of the Board, any potential strategic transaction involving AbbVie ( the “Potential Transaction”) and the process to be followed by the Board to determine the independence of various Board members to serve on such committee, including a review of an independence questionnaire that had previously been completed by certain members of the Board.

After further discussion, the Board determined it advisable to establish a committee of the Board consisting of one or more directors who are independent, who are not members of Soliton’s management, and who do not have an interest in the Potential Transaction that is different from, or in addition to, the interests of the Soliton’s stockholders generally (the “Strategic Alternatives Committee” or the “SAC”), to review and evaluate the Potential Transaction (including whether to enter into discussions with respect to the Potential Transaction) and Soliton’s other strategic alternatives. The Board then determined that each of Jonathan P. Foster and Danika Harrison met these standards and designated them, by resolution of the Board, to serve as the members of the SAC. The authorizing resolutions delegated to the SAC the following duties and powers, among others:

 

   

to review and evaluate the terms and conditions, and determine the advisability of the Potential Transaction and any alternative transaction,

 

   

to negotiate with AbbVie or any other party the SAC deems appropriate with respect to the terms and conditions of the Potential Transaction or any alternative transaction and, if the SAC deems appropriate, but subject to the limitations of applicable law, to approve the execution and delivery of documents governing the Potential Transaction or any alternative transaction on behalf of Soliton,

 

   

to determine whether the Potential Transaction or any alternative transaction negotiated by the SAC is fair to, and in the best interests of, Soliton and all of its stockholders,

 

   

to recommend to the full Board what action, if any, should be taken by the Board with respect to the Potential Transaction or any alternative,

 

   

to retain independent legal counsel to advise it and assist it in connection with fulfilling its duties as delegated by the Board, and

 

   

to retain such other consultants and agents, including, without limitation, independent financial advisors, as the SAC may deem necessary or appropriate to advise it and assist it in connection with fulfilling its duties as delegated by the Board and to perform such services and render such opinions as may be necessary or appropriate in order for the SAC to discharge such duties.

The authorizing resolutions also:

 

   

authorized and directed Soliton to pay all fees, expenses and disbursements of legal counsel, financial advisors, consultants and agents retained by the SAC,

 

   

provided that the Board shall not recommend the Potential Transaction or any alternative for approval by Soliton’s stockholders or otherwise approve the Potential Transaction or any alternative without a prior favorable recommendation of the Potential Transaction or any such alternative by the SAC, and

 

   

obligated Soliton, to the fullest extent permitted by law, to indemnify, hold harmless and advance expenses to each member of the SAC in connection with any threatened, pending or completed action, suit or proceeding (whether criminal, administrative or investigative) in which the SAC, or any of its members, is or is threatened to be made a participant (including as a witness) arising from or relating to any such member’s appointment to or service on the SAC, the Potential Transaction or any alternative, or the discharge of the powers or duties of the SAC or any of its members pursuant to or in furtherance of the Board resolutions.

During late September 2020 into October 2020, representatives of Soliton and AbbVie prepared for an in-person meeting held on October 8, 2020 to observe the Soliton device in use. Also during this period, the

 

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Board and then the SAC after its formation, having taken into account Guggenheim Securities’ expertise in the aesthetic medical device industry and its familiarity with Soliton, among other factors, elected to retain Guggenheim Securities as its financial advisor and negotiated the terms of Guggenheim Securities’ engagement.

On October 8, 2020, the SAC held a meeting via videoconference at which Ms. Bisson and representatives of Hogan Lovells and Schiff Hardin were present. The SAC discussed the status of the negotiations with Guggenheim Securities on its engagement letter. The SAC also approved the engagement of Nelson Mullins Riley & Scarborough LLP (“Nelson Mullins”) as SAC counsel.

From October 8, 2020 until October 27, 2020, Ms. Bisson and a representative of Nelson Mullins, under the direction of the SAC, negotiated with Guggenheim Securities on the terms of the Guggenheim Securities engagement letter. Also during that period, the SAC, members of Soliton’s senior management and representatives of Nelson Mullins discussed with Guggenheim Securities its proposed strategy to approach possible strategic parties other than AbbVie on Soliton’s behalf.

On October 19, 2020, the SAC held a meeting via videoconference at which Ms. Bisson, representatives of Guggenheim Securities and a representative of Nelson Mullins were present. At the meeting, representatives of Guggenheim Securities presented its proposed outreach to parties that the SAC and Guggenheim Securities believed might be willing to consider entering into discussions with Soliton regarding an investment in, licensing arrangement with, purchase of or other strategic transaction with Soliton (“strategic parties”).

Representatives of Guggenheim Securities presented a list of strategic parties and discussed each one with the participants in the meeting. The SAC members suggested additional parties and approved an initial list of eight parties for Guggenheim Securities to approach on behalf of Soliton.

On October 20, 2020, the Board held a meeting via videoconference at which Ms. Bisson and a representative of Schiff Hardin were present. The Board appointed Niquette Hunt and Michael K. Kaminer, M.D. as independent members of the Board, effective subject to their acceptance of the Company’s appointment, which occurred on October 22 and October 23, 2020, respectively. Mr. Hauser then recused himself from the meeting. The Board approved the form of an employment agreement between Soliton and Mr. Hauser under which he would serve as President and Chief Executive Officer of Soliton, to be effective when executed on behalf of Soliton and by Mr. Hauser. Mr. Hauser’s appointment became effective on November 2, 2020. Christopher Capelli, M.D. retained the title of Chief Science Officer and was appointed as Vice Chairman of the Board.

On October 27, 2020, the SAC, after reviewing the final changes made at the SAC’s direction, approved by unanimous written consent the final engagement letter between the SAC and Guggenheim Securities and authorized its engagement. Representatives of the SAC and Guggenheim Securities then signed the engagement letter.

On November 9, 2020, the SAC held a meeting via videoconference at which Mr. Hauser, Ms. Bisson, and representatives of Guggenheim Securities were present. The representatives of Guggenheim Securities discussed the results of the preliminary contacts that Guggenheim Securities had made with eight strategic parties, reporting that three parties expressed interest in initial meetings with Soliton and five others declined to proceed due to various reasons. The SAC identified and discussed other possible candidates.

During Guggenheim Securities’ outreach on behalf of Soliton, Guggenheim Securities contacted a total of ten parties, of which four parties executed confidentiality agreements, none of which contained a standstill provision (and thus none of which included a “don’t ask, don’t waive” provision).

On November 9 and December 18, 2020, Mr. Hauser spoke with a senior executive of Party D, who indicated that it was interested in learning more about Soliton’s technology and the potential for an international collaboration.

 

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Between November 9, 2020 and December 18, 2020, Mr. Hauser had several discussions with AbbVie management regarding Soliton’s progress in obtaining approval from the U.S. Food & Drug Administration (the “FDA”) for Soliton’s RAP technology for short-term improvement in the appearance of cellulite, AbbVie’s interest in a transaction with Soliton, the possible timing of a proposal and AbbVie’s approval process, including the involvement of key members of AbbVie’s management.

On November 18, 2020, members of Soliton senior management and a representative of Guggenheim Securities held an introductory call with Party A to provide an overview of Soliton’s RAP technology and clinical results.

On November 20, 2020, the SAC held a meeting via videoconference at which Mr. Hauser, Dr. Capelli, Ms. Bisson, representatives of Guggenheim Securities and a representative of Nelson Mullins were present. A representative of Guggenheim Securities provided an update regarding preliminary contacts that Guggenheim Securities had made with two more strategic parties, Party B and Party C. He indicated that representatives of Party D were planning to meet with representatives of Guggenheim Securities in the near future. A representative of Guggenheim Securities also reported on Guggenheim Securities’ recent meeting with Party A.

Beginning in the late fall of 2020, Soliton senior management, at the direction of the SAC, began to prepare updated financial projections regarding Soliton’s financial performance as a standalone company.

On December 4, 2020, the Board held a meeting via videoconference with members of Soliton’s senior management and a representative of Schiff Hardin present. After confirming that director Niquette Hunt met the required standards for SAC membership, the Board designated Ms. Hunt as a member of the SAC.

On December 4, 2020, the SAC held a meeting via videoconference at which all members of the Board, members of senior management, representatives of Guggenheim Securities and a representative of Nelson Mullins were present. A representative of Guggenheim Securities explained that discussions were ongoing with four strategic parties: Party A, Party B, Party D, and Party E. For each such party, the Guggenheim Securities’ representative described the recent contacts, the level of interest that such party had displayed, any plans for future meetings and any requests for additional information. He also noted in particular that Party C had expressed concerns that Soliton was too large a company for Party C to acquire, and as such Party C would not pursue a meeting with Soliton’s management team.

Mr. Hauser reported on his recent discussions with AbbVie management.

On December 8, 2020, representatives of Guggenheim Securities and members of Soliton senior management conducted a second conference call with Party A to answer additional questions presented by Party A.

On December 11, 2020, representatives of Guggenheim Securities and members of Soliton senior management conducted an initial meeting with Party D.

On December 15, 2020, the SAC held a meeting via videoconference at which all other members of the Board, Ms. Bisson, representatives of Guggenheim Securities and a representative of Nelson Mullins present. A representative of Guggenheim Securities summarized the recent developments in the outreach to and meetings with strategic parties and provided an update regarding discussions with four possible strategic parties: Parties A, B, D and E. He noted that Party A had informed Guggenheim Securities on December 14 that it had decided not to pursue an acquisition of Soliton. He observed that Party B had expressed interest in a discussion in early January 2021. The representative of Guggenheim Securities reported that Party D desired to follow up and continue discussions. He discussed Party E with the SAC and noted that a call with Party E was scheduled for December 18, 2020.

Mr. Hauser then reported on his recent discussions with AbbVie.

 

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On December 18, 2020, AbbVie management communicated to Mr. Hauser that AbbVie would defer any further consideration of a strategic transaction with Soliton until AbbVie had greater clarity regarding FDA approval.

Also on December 18, 2020, representatives of Guggenheim Securities and members of Soliton’s senior management conducted a second meeting with Party D and an initial meeting with Party E.

On January 5, 2021, Party E informed Guggenheim Securities that Party E would need to review the launch and commercialization of Soliton’s RAP device before it would be willing to enter into discussions regarding a strategic partnership or transaction and therefore would not engage in further discussions at this time.

On January 7, 2021, Guggenheim Securities again engaged with Party D regarding its potential interest in a strategic partnership or transaction with Soliton. Party D informed Soliton that it would not pursue an acquisition of Soliton based on valuation at this stage but would be open to further discussions regarding possible commercial collaboration arrangements between the two companies.

On January 12, 2021, representatives of Guggenheim Securities and members of Soliton’s senior management conducted an initial meeting with Party B.

On January 18, 2021, Party B informed Guggenheim Securities that it would not pursue an acquisition of Soliton due to other strategic priorities.

On January 19, 2021, the SAC held a meeting via videoconference at which all members of the Board (other than one independent director), Ms. Bisson, representatives of Guggenheim Securities and a representative of Nelson Mullins were present. A representative of Guggenheim Securities summarized the recent developments in the strategic process, reporting on his discussions with three potential transaction parties: Party B, Party D, and Party E, noting that Party A had previously elected not to proceed with the strategic process. While each of Party B, Party D, and Party E had expressed an interest in continuing discussions regarding potential future commercial or other relationships with Soliton, each had also determined not to pursue an acquisition transaction prior to commercialization of the Soliton RAP device.

On January 27, 2021, representatives of Guggenheim Securities met with senior executives of AbbVie to broadly discuss business development-related opportunities across the pharmaceutical and medical device sectors. The senior executives conveyed their continued interest in Soliton and the ongoing internal discussions that were taking place at AbbVie.

Beginning in late January 2021 and continuing to March 9, 2021, Mr. Hauser had several discussions with AbbVie management regarding AbbVie’s due diligence process and if and when AbbVie might make a proposal to Soliton regarding a strategic transaction.

On February 1, 2021, Soliton announced that on January 29, 2021, the FDA cleared Soliton’s RAP technology for short-term improvement in the appearance of cellulite.

On February 17, 2021, Mr. Klemp and Mr. Hauser held a conference call with a representative of Remeditex Ventures LLC (“Remeditex”), which, together with its affiliates, owns 43.5% of Soliton’s issued and outstanding common stock, pursuant to a confidentiality arrangement. Given Remeditex’s prior participation in multiple Soliton financing transactions, Mr. Klemp and Mr. Hauser updated the Remeditex representative on the potential need for additional financing in connection with Soliton’s planned commercialization of its RAP device. Mr. Hauser also reviewed the ongoing communication with AbbVie and the activities of Guggenheim Securities on behalf of Soliton, including the outreach to possible strategic parties.

On February 18, 2021, the SAC (with one member absent) held a meeting via videoconference at which two other Board members, members of Soliton’s senior management, and representatives of Guggenheim Securities

 

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and Nelson Mullins were present. Mr. Hauser summarized his recent discussions with members of AbbVie management regarding whether AbbVie was interested in a transaction with Soliton in the near term and noted in particular that a senior AbbVie executive had been noncommittal in a conversation on February 11, 2021. A representative of Guggenheim Securities then reported to the SAC regarding recent discussions by representatives of Guggenheim Securities with members of AbbVie’s management, which was consistent with Mr. Hauser’s report.

On March 5, 2021, the SAC held a meeting via videoconference at which all other members of the Board, Ms. Bisson, representatives of Guggenheim Securities and a representative of Nelson Mullins were present. Mr. Hauser reported on his recent discussions with members of AbbVie’s management. Based on those discussions, he understood from AbbVie that it would decide in the near term whether it would seek to enter into negotiations with Soliton regarding a potential strategic transaction. Ms. Bisson reported that senior management was preparing updated financial projections based on a range of assumptions, and that these updated projections would be presented shortly to Soliton senior management, the Board and the SAC for their review and comment.

On March 9, 2021, a member of AbbVie’s management informed Mr. Hauser that Soliton should anticipate receiving a formal proposal from AbbVie soon.

On March 10, 2021, Mr. Klemp, recognizing that any potential acquiror of Soliton would likely require a stockholder with an ownership interest at the level of Remeditex to support the potential transaction, possibly through a voting or other agreement, contacted a Remeditex representative to inform Remeditex that Soliton expected an acquisition proposal from AbbVie in the near term. The Remeditex representative confirmed to Mr. Klemp that Remeditex would be prepared to support such a transaction, subject to acceptable price and terms.

On March 11, 2021, the SAC held a meeting via videoconference at which all but one Board member, members of Soliton’s senior management, and representatives of Guggenheim Securities and Nelson Mullins were present. Mr. Hauser summarized his recent discussions with members of AbbVie’s management, noting that he expected AbbVie to make a proposal to Soliton in the near future.

The representatives of Guggenheim Securities then reviewed with the SAC a presentation that included the updated financial forecasts from Soliton senior management as well as a preliminary illustrative financial analysis of Soliton on a standalone basis from Guggenheim Securities using the updated financial projections.

Shortly after the SAC meeting on March 11, 2021 was adjourned, Soliton received a proposal letter from AbbVie, in which AbbVie stated that it was prepared to offer a purchase price of between $17 and $19 per share to acquire 100% of the issued and outstanding shares of common stock of Soliton in an all-cash transaction. AbbVie stated that it had adequate financial resources available to consummate the contemplated transaction and that its obligations under the definitive transaction agreement would not be subject to any financing condition.

On March 12, 2021, representatives of Hogan Lovells, Nelson Mullins and Richards Layton & Finger met with Mr. Foster (the chair of the SAC) and Soliton’s senior management and discussed preliminarily the process to be followed in negotiating with AbbVie if the SAC and the Board determined it was in the best interests of Soliton’s stockholders to do so.

On March 14, 2021, the Board held a meeting via videoconference at which members of Soliton’s senior management and representatives of Guggenheim Securities, Hogan Lovells, Nelson Mullins and Schiff Hardin were present. Representatives of Guggenheim Securities reviewed with the Board the specific terms of the AbbVie proposal and related matters, including the proposed pricing and other terms, and then reviewed with the Board a preliminary financial analysis of the price presented by AbbVie’s proposal.

A representative of Hogan Lovells then reviewed and discussed with the Board its fiduciary duties and other legal matters in connection with the Board’s consideration of the AbbVie proposal. The Hogan Lovells

 

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representative also discussed with the Board the likely transaction process, the key deal points that would likely be raised, and milestones and expected timelines.

Immediately after the Board meeting on March 14, 2021, the SAC held a meeting via videoconference at which representatives of Nelson Mullins were present. The SAC reviewed with counsel the matters discussed in the immediately preceding Board meeting. The SAC directed the Chair of the SAC to direct representatives of Guggenheim Securities to engage in further discussion with AbbVie representatives, including with respect to potential additional sources of value to AbbVie and to confirm the assumptions underlying AbbVie’s calculation of Soliton common stock equivalents in formulating its proposal.

On March 15, 2021, a representative of Guggenheim Securities spoke with AbbVie representatives regarding the matters identified by the SAC as well as AbbVie’s due diligence plan.

On March 16, 2021, the Board held a meeting via videoconference at which members of Soliton’s senior management and representatives of Guggenheim Securities, Hogan Lovells and Nelson Mullins were present. A representative of Guggenheim Securities provided an update regarding Guggenheim Securities’ call with AbbVie, including with respect to the matters previously identified by the SAC.

The representative of Guggenheim Securities then reviewed with the Board the updated financial analysis related to Soliton on a standalone basis.

The Board then discussed a proposed response to the AbbVie proposal. The Board members and Soliton senior management discussed the proposed range of offer prices per share and expressed their views that Soliton should seek an increased price per share.

Subsequently on March 16, 2021, the SAC held a meeting via videoconference at which representatives of Guggenheim Securities and Nelson Mullins were present. The SAC reviewed with the Guggenheim Securities representatives certain of the key points previously discussed with the Guggenheim Securities representatives during the preceding Board meeting.

The SAC discussed with the participants in the meeting the response to be conveyed to AbbVie and concluded that AbbVie’s proposed price per share must be higher. The SAC authorized Guggenheim Securities to deliver that message to AbbVie.

On March 17, 2021, a representative of Guggenheim Securities delivered the above-described response to AbbVie as directed by the SAC.

On March 18, 2021, the SAC held a meeting via videoconference at which all other members of the Board, Ms. Bisson and representatives of Guggenheim Securities, Hogan Lovells and Nelson Mullins were present. A representative of Guggenheim Securities informed the SAC that Guggenheim Securities had conveyed the agreed-upon message and that AbbVie stated it would commence its due diligence shortly.

Beginning on March 19, 2021, AbbVie began conducting its due diligence, with Soliton’s cooperation. This process continued over the next several weeks.

On March 22, 2021, representatives of Hogan Lovells, Nelson Mullins and Kirkland & Ellis LLP, counsel to AbbVie (“Kirkland”), held an introductory call at which counsel discussed the role of the SAC and the expected due diligence process and timing.

On March 28, 2021, the SAC held a meeting via videoconference at which Ms. Bisson and a representative of Nelson Mullins were present. Ms. Bisson updated the SAC regarding Soliton’s management’s engagement with AbbVie in connection with AbbVie’s due diligence investigation.

 

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The SAC discussed with the participants in the meeting the importance of maintaining Soliton’s key personnel through the closing to ensure that Soliton would be able to continue to pursue its strategic plan in the event that the transaction, if agreed to, did not close. The SAC then discussed a preliminary plan to increase certain retention and severance payments to Soliton’s employees below the Vice President level to provide incentives to them to continue to work for Soliton during the period between the signing and closing of an acquisition transaction.

On April 1, 2021, the Board held a meeting via videoconference at which Ms. Bisson and a representative of Guggenheim Securities were present (one independent director was not present). Members of Soliton senior management provided an update to the Board regarding AbbVie’s ongoing due diligence activities.

On April 5, 2021, AbbVie submitted to Guggenheim Securities a revised offer price of $21.75 per share.

On April 6, 2021, the SAC held a meeting at which all other members of the Board, Ms. Bisson and representatives of Guggenheim Securities, Hogan Lovells and Nelson Mullins were present. Representatives of Guggenheim Securities reviewed with the SAC its updated financial analysis of the AbbVie proposal reflecting the proposed $21.75 price per share. A representative of Guggenheim Securities also summarized the current status of negotiations with AbbVie, noting that AbbVie stated that it had stretched on its valuation, but had not stated that the proposal was its “best and final” offer.

Members of the SAC and Soliton senior management discussed various potential prices per share to consider proposing to AbbVie, along with the potential risks and benefits of remaining a standalone company. After discussion, including with representatives of Guggenheim Securities, the SAC instructed Guggenheim Securities to convey a counterproposal to AbbVie of $23.90 per share.

On April 6, 2021, Mr. Klemp called a representative of Remeditex to inform Remeditex of AbbVie’s updated proposal and Soliton’s proposed counterproposal. The Remeditex representative informed Mr. Klemp that Remeditex would be prepared to support such a transaction.

On April 7, 2021, Guggenheim Securities communicated Soliton’s counterproposal of $23.90 per share to AbbVie.

On April 8, 2021, AbbVie responded with a “best and final” offer price of $22.60 per share and communicated a willingness to work expeditiously towards the signing of a definitive transaction agreement and public announcement.

On April 8, 2021, the Board held a meeting via videoconference at which members of Soliton’s senior management and representatives of Guggenheim Securities, Hogan Lovells and Nelson Mullins were present. A representative of Guggenheim Securities reported to the Board regarding a call between representatives of Guggenheim Securities and AbbVie senior management in which AbbVie had conveyed the “best and final” offer price of $22.60 per share. AbbVie had also conveyed a request to engage in further due diligence, including visits to Soliton’s contract manufacturers. The representative of Guggenheim Securities reviewed with the Board Guggenheim Securities’ updated financial analysis that reflected AbbVie’s offer price of $22.60 per share. The Board members and Soliton senior management discussed the revised offer price and indicated to the SAC that they were in favor of accepting AbbVie’s proposed price.

On April 8, 2021, immediately following the Board meeting, the SAC held a meeting via videoconference at which representatives of Guggenheim Securities, Hogan Lovells and Nelson Mullins were present. After discussion, including with representatives of Guggenheim Securities, the SAC directed representatives of Guggenheim Securities to respond to AbbVie’s proposal by conveying that the SAC had determined that AbbVie’s proposed purchase price of $22.60 per share was acceptable, subject to negotiation of mutually agreeable transaction agreements.

 

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Later on April 8, 2021, Guggenheim Securities communicated to AbbVie that Soliton had accepted AbbVie’s proposal of $22.60 per share, subject to negotiation of mutually agreeable transaction agreements.

During the week of April 8, 2021, Soliton facilitated further due diligence and site visits by AbbVie.

On April 14, 2021, Kirkland delivered an initial draft of the merger agreement to Hogan Lovells.

On April 18, 2021, the SAC held a meeting via videoconference at which Mr. Hauser, Ms. Bisson and representatives of Hogan Lovells, Nelson Mullins and Richards Layton & Finger were present. A representative of Hogan Lovells reviewed the draft merger agreement with the SAC and identified certain key issues, including provisions regarding, among other things, the allocation of antitrust risk between the parties, various termination rights and related fees, and AbbVie’s request for support agreements from certain stockholders.

After discussion of the key issues, the SAC provided direction to representatives of Hogan Lovells with regard to those matters.

The SAC then discussed certain compensation matters, focusing first on Soliton management’s concern that key employees may consider leaving Soliton’s employment between announcement of entering into the merger agreement and closing of the transactions contemplated thereby, which could harm Soliton’s business and prospects if the transaction did not close as anticipated. Although a retention bonus plan providing three months’ base salary had already been approved by the Board, Soliton’s management recommended that given the risk to Soliton, a severance payment of six months’ base salary should be granted to all employees (other than executive officers who had employment agreements with Soliton already in place) and would be in the best interest of the Soliton stockholders. A discussion ensued and the SAC determined to defer taking any action at that time.

On April 19, 2021, a conference call was held among representatives of Hogan Lovells, Kirkland and Arnold & Porter Kaye Scholer, antitrust counsel to AbbVie, to discuss likely required regulatory approvals and the expected approval process and timing.

On April 20, 2021, Hogan Lovells sent a revised draft merger agreement to Kirkland.

On April 24, 2021, Kirkland sent another revised draft merger agreement to Hogan Lovells.

On April 25, 2021, Mr. Foster, Mr. Hauser, Ms. Bisson and representatives of Hogan Lovells and Nelson Mullins met via videoconference to review and discuss certain of the key open points in the draft merger agreement.

On April 26, 2021, the SAC held a meeting via videoconference at which a representative of Nelson Mullins was present. Mr. Foster and the representative of Nelson Mullins summarized the discussion during the videoconference held the previous evening at which certain key points in the draft merger agreement were considered. After discussion, the SAC concurred with the approach suggested by Hogan Lovells with respect to the key open issues, including the proposed antitrust provisions, and a representative of Nelson Mullins subsequently conveyed the SAC’s concurrence to Hogan Lovells.

Later on April 26, 2021, Hogan Lovells sent a revised draft merger agreement to Kirkland.

On April 27, 2021, a conference call was held among representatives of Soliton, AbbVie, Hogan Lovells and Kirkland to discuss the disclosure schedules that would be required to be prepared and attached to the definitive merger agreement.

On April 28, 2021, representatives of Hogan Lovells discussed with representatives of Kirkland the outstanding issues in the revised draft merger agreement, including the extent of the measures that AbbVie would be required to take to ensure regulatory clearance and the related termination rights and fees if such clearance was not obtained.

 

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On April 30, 2021, representatives of Hogan Lovells again discussed with representatives of Kirkland the outstanding issues in the revised draft merger agreement. Shortly after this discussion, Kirkland sent a further revised draft merger agreement to Hogan Lovells.

On May 1, 2021, the Board held a meeting via videoconference at which Ms. Bisson and representatives of Guggenheim Securities, Hogan Lovells and Nelson Mullins were present. A representative of Hogan Lovells reported on the call held the previous day between representatives of Hogan Lovells and Kirkland regarding open issues in the merger agreement. The representative of Hogan Lovells reviewed the remaining open issues, including the timing and conditions for payment, of the reverse termination fee payable by AbbVie if the transaction did not close due to the failure to receive regulatory approval. The Board and Soliton senior management then discussed a proposed response on this and other open issues.

Immediately after the Board meeting on May 1, 2021, the SAC held a meeting via videoconference at which representatives of Guggenheim Securities, Hogan Lovells and Nelson Mullins were present. After discussion, the SAC concurred with the proposed response to AbbVie’s counter-proposal and directed Guggenheim Securities and Hogan Lovells to present it to AbbVie and Kirkland, respectively.

On May 2, 2021, Guggenheim Securities and Hogan Lovells delivered this counter-proposal to AbbVie and Kirkland, respectively.

Later on May 2, 2021, Hogan Lovells sent a revised draft merger agreement to Kirkland.

On May 3, 2021, representatives of Kirkland discussed with representatives of Hogan Lovells AbbVie’s counter-proposal on the remaining open issues in the merger agreement, including the amount, timing and conditions for payment of the reverse termination fee payable by AbbVie to Soliton if the transaction did not close due to the failure to receive regulatory approvals. The representatives of Kirkland stated that AbbVie was unwilling to further improve the terms to be included in the draft merger agreement. Shortly after this discussion, Kirkland sent a revised draft merger agreement to Hogan Lovells.

On May 4, 2021, the Board held a meeting via videoconference at which Ms. Bisson and representatives of Guggenheim Securities, Hogan Lovells and Nelson Mullins were present. A representative of Hogan Lovells gave the Board an update on Hogan Lovells’ discussions with Kirkland regarding the remaining open issues in the draft merger agreement, including the amount, timing and conditions for payment of the reverse termination fee. He described Hogan Lovells’ conversation with Kirkland, noting that representatives of Kirkland had conveyed an updated AbbVie proposal regarding a reverse termination fee that could be up to $20 million if the transaction did not close prior to the twelve month anniversary of the execution of the merger agreement and that Kirkland had stated that AbbVie was not prepared to improve its proposal. The Board and Soliton’s senior management discussed the AbbVie counter-proposal and indicated to the SAC that they were in favor of accepting AbbVie’s proposed terms as set forth in the merger agreement.

Immediately after the Board meeting on May 4, 2021, the SAC held a meeting via videoconference at which representatives of Hogan Lovells and Nelson Mullins were present. After discussion, the SAC determined that it was advisable for Soliton to accept the terms reflected in AbbVie’s most recent proposal and directed Guggenheim Securities and Hogan Lovells to convey that message to AbbVie and Kirkland, respectively. Guggenheim Securities and Hogan Lovells did so on May 4, 2021.

Following the Board and SAC meeting on May 4, 2021, representatives of Hogan Lovells and representatives of Kirkland worked to finalize the proposed merger agreement and the related support agreements.

On May 4, 2021, Mr. Klemp called a Remeditex representative to inform Remeditex that Soliton and AbbVie had agreed upon the form of merger agreement and that Remeditex would be asked to sign a support agreement as a condition to AbbVie entering into the merger agreement. After review of the support agreement, Remeditex advised Soliton that it would be willing to enter into the support agreement.

 

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On May 5, 2021, the Board held a meeting via videoconference at which Ms. Bisson and representatives of Guggenheim Securities, Hogan Lovells and Nelson Mullins were present. The Board reviewed the financial projections prepared by Soliton’s senior management and discussed with members of Soliton’s management the underlying assumptions. After discussion, the Board authorized and directed Guggenheim Securities to use the specified financial projections in connection with its financial analysis of the potential acquisition of Soliton by AbbVie and the preparation of Guggenheim Securities’ fairness opinion.

Immediately after the Board meeting on May 5, 2021, the SAC held a meeting via videoconference at which representatives of Hogan Lovells and Nelson Mullins were present. After discussion among the participants in the meeting, the SAC authorized and directed Guggenheim Securities to use the specified financial projections in connection with its financial analysis of the potential acquisition of Soliton by AbbVie and in the preparation of Guggenheim Securities’ fairness opinion.

On May 7, 2021, AbbVie’s Board of Directors met and approved the merger agreement.

On May 8, 2021, the Board held a meeting via videoconference at which Ms. Bisson and representatives of Guggenheim Securities, Hogan Lovells and Nelson Mullins were present. A representative of Hogan Lovells reviewed the directors’ fiduciary duties and other legal matters in connection with the Board’s consideration of the proposed merger agreement. The representative of Hogan Lovells reviewed with the Board the final terms of the proposed merger agreement and the related Support Agreements. He reviewed with the Board the terms of (a) a non-competition and non-solicitation agreement to be entered into with Mr. Hauser (the “Hauser Non-Competition and Non-Solicitation Agreement”), which provided for certain non-competition and non-solicitation obligations of Mr. Hauser following the consummation of the transactions contemplated by the merger agreement; and (b) an amendment to Mr. Hauser’s employment agreement (the “Hauser Employment Agreement Amendment”) to provide a limited tax-gross up for any excise taxes incurred under Section 4999 of the Internal Revenue Code of 1986. The representative of Hogan Lovells also reviewed with the Board the terms of, and considerations with respect to, a forum selection bylaw, including the scope of forum selection bylaws, the enforceability of forum selection bylaws and the potential benefits of adopting a forum selection bylaw.

A representative of Guggenheim Securities then presented and discussed with the Board the financial analysis performed by Guggenheim Securities. The representative informed the Board that Guggenheim Securities was prepared to render its opinion as to the fairness of the merger consideration to be received by Soliton’s stockholders under the merger agreement.

Following the Guggenheim Securities presentation, the Board meeting was recessed to allow the Compensation Committee of the Board (the “Compensation Committee”) to meet. The Compensation Committee then held a meeting via videoconference at which representatives of Hogan Lovells and Nelson Mullins were present. At this meeting, the Compensation Committee approved and recommended that the Board approve (a) the Hauser Non-Competition and Non-Solicitation Agreement; (b) the Hauser Employment Agreement Amendment; and (c) retention and severance arrangements for certain Soliton employees. The Compensation Committee was then adjourned.

Immediately after the Compensation Committee meeting on May 8, 2021, the SAC held a meeting via videoconference at which representatives of Guggenheim Securities, Hogan Lovells and Nelson Mullins were present. A representative of Guggenheim Securities delivered to the SAC Guggenheim Securities’ oral opinion, which oral opinion was subsequently confirmed in writing by delivery of Guggenheim Securities’ written opinion dated the same date, to the effect that, as of the date of the opinion, and based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Guggenheim Securities in preparing its opinion, the consideration to be received by the holders of Company common stock in the merger is fair, from a financial point of view, to such holders. After discussion, the SAC unanimously determined that the merger agreement, the merger and the other transactions contemplated by the merger agreement were advisable, fair to and in the best interests of Soliton and Soliton’s

 

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stockholders, unanimously approved the merger agreement and unanimously recommended that the Board approve and adopt the merger agreement, the merger and the other transactions contemplated by the merger agreement. The SAC also approved and recommended that the Board approve (a) the Support Agreements, (b) the Hauser Non-Competition and Non-Solicitation Agreement; and (c) the Hauser Employment Agreement Amendment.

Following the meetings of the Compensation Committee and the SAC, the Board meeting was reconvened, and each committee reported to the Board regarding the actions taken at such committee’s meeting, including the recommendations to the Board. The SAC reported that Guggenheim Securities had delivered its oral fairness opinion as described above.

A representative of Guggenheim Securities then delivered to the Board Guggenheim Securities’ oral opinion to the effect that, as of the date of the opinion, and based upon and subject to the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Guggenheim Securities in preparing its opinion, the merger consideration to be received by Soliton’s stockholders under the merger agreement is fair, from a financial point of view, to such stockholders. Guggenheim Securities delivered its signed written fairness opinion to Hogan Lovells and Nelson Mullins promptly after the meeting.

After further discussion and consideration, the Board, based upon, among other things, the recommendation of the SAC, 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 Soliton and Soliton’s stockholders, and unanimously adopted, authorized and approved the merger agreement and the performance by Soliton of all of the transactions described therein or contemplated thereby, including the merger. The Board unanimously recommended that Soliton’s stockholders vote for the adoption of the merger agreement and approval of the merger and the other transactions contemplated by the merger agreement. The Board also approved (a) the Support Agreements, (b) the Hauser Non-Competition and Non-Solicitation Agreement; and (c) the Hauser Employment Agreement Amendment.

Recommendation of the Board and Soliton’s Reasons for the Merger

At its meeting on May 8, 2021, the Board considered the merger agreement and after due consideration and based in part upon the unanimous recommendation of the SAC, unanimously (i) determined that the merger agreement and the merger are advisable, fair to and in the best interests of Soliton and its stockholders, (ii) duly authorized and approved the execution, delivery and performance by Soliton of the merger agreement and the consummation by Soliton of the merger and the other transactions contemplated by the merger agreement, (iii) directed that the adoption of the merger agreement be submitted to holders of Soliton’s common stock, and (iv) recommended that the holders of Soliton common stock vote their shares to adopt the merger agreement at a meeting of the holders of Soliton’s common stock. Accordingly, the Board unanimously recommends that stockholders vote “FOR” the merger proposal and the adjournment proposal.

In reaching their respective unanimous determinations that the merger agreement and the merger are advisable, fair to and in the best interests of Soliton and its stockholders and to adopt and approve the merger agreement, the SAC and the Board consulted with and received advice from its financial and legal advisors and Soliton management and considered a number of factors, including the material factors that are discussed below. The discussion in this section is not intended to be an exhaustive list of the information and factors considered by the SAC, but rather includes all material factors considered by the SAC and the Board. In view of the wide variety of factors considered by the SAC and the Board in connection with their evaluations of the merger and the complexity of these matters, neither the SAC nor the Board considered it practicable, nor did either attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the SAC or the Board. In

 

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addition, individual members of the SAC and the Board may have given different weight to different factors. Each of the SAC and the Board made its recommendation based on the totality of the information available to the SAC and the Board, including discussions with, and questioning of, management and the financial and legal advisors.

Each of the SAC and the Board considered, among other things, the following factors as supporting its decision to recommend that Soliton’s stockholders vote in favor of the adoption of the merger agreement

 

   

the $22.60 per share price to be paid in cash for each share of common stock, which represented:

 

   

a premium of approximately 26% over the closing price of the common stock of $18.00 on May 7, 2021 (the last trading day prior to the Board’s approval of the merger agreement);

 

   

a premium of 29% to the volume weighted average price of the common stock for the 10 trading days prior to and including May 7, 2021;

 

   

a premium of 34% to the volume weighted average price of the common stock for the 30 trading days prior to and including May 7, 2021; and

 

   

a premium of 45% to the volume weighted average price of the common stock for the 90 trading days prior to and including May 7, 2021;

 

   

the SAC’s and the Board’s respective belief, based on discussions with members of Soliton’s senior management and representatives of Guggenheim Securities and counsel to the SAC and Soliton, respectively, that $22.60 per share was the highest price AbbVie would be willing to pay;

 

   

the financial presentation and the opinion, each dated as of May 8, 2021, of Guggenheim Securities to the SAC (which financial presentation and opinion were also provided to the Board at the SAC’s request and with the SAC’s authorization), as to the fairness, from a financial point of view and as of the date of the opinion, of the merger consideration, which opinion was based on and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken as more fully described under the section entitled “ —Opinion of Financial Advisor” below;

 

   

the SAC’s and the Board’s understanding of Soliton’s business, operations, financial condition, earnings, prospects, competitive position and the nature of the aesthetic medical device industry;

 

   

the SAC’s and the Board’s understanding of the risks, uncertainties and challenges facing Soliton and the aesthetic medical device industry, including the risks that Soliton would face if it continued to operate on a standalone basis and sought to launch and commercialize its RESONIC console, including, risks, uncertainties and challenges relating to Soliton’s ability to obtain future regulatory approvals; launch and market planned products; regulatory developments involving Soliton’s products and product candidates; and other risks and uncertainties, including the risk factors set forth in Soliton’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020;

 

   

the SAC’s and the Board’s awareness that to commercialize the RESONIC console successfully, Soliton would have to raise additional capital, which would dilute the interests of Soliton’s current stockholders and might not be available on favorable terms, or at all, when needed;

 

   

the SAC’s and the Board’s assessment, taking into account the foregoing factors, of Soliton’s value on a standalone basis relative to the $22.60 per share of common stock to be paid in cash in the merger;

 

   

the possibility that it could take a considerable period of time before the trading price of the common stock would reach and sustain at least the offer price of $22.60 per share, as adjusted for present value;

 

   

the extensive, arm’s-length negotiations with AbbVie which, among other things, resulted in an increase in the merger consideration to $22.60 per share from AbbVie’s initial proposal of between $17 and $19 per share;

 

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the fact that the consideration to be paid by AbbVie is all cash, which provides certainty, immediate value and liquidity to the holders of Soliton common stock, while avoiding long-term business risk, including the risks and uncertainties relating to Soliton’s prospects (including the prospects described in the management’s forecasts summarized in the section below entitled “—Certain Unaudited Prospective Financial Information”), immediately upon the closing of the merger;

 

   

the SAC’s process for soliciting parties (including both strategic and financial parties) that were believed to be the most interested in acquiring Soliton, as described above in the section entitled “—Background of the Merger”;

 

   

the fact that Soliton and its financial advisors had discussions with numerous parties prior to Soliton’s entry into the merger agreement with AbbVie and that, as of May 8, 2021, none of those parties was willing to move forward with a proposal for a potential transaction with Soliton;

 

   

the SAC’s and the Board’s respective belief that Soliton’s stand-alone strategic plan involved significant risks in light of the industry and competitive pressures Soliton was facing and the SAC’s and the Board’s concerns with respect to the risks relating to Soliton’s ability to execute on its strategic plan, including the possibility that the strategic plan might not produce the intended results on the targeted timing or at all;

 

   

AbbVie’s track record in successfully acquiring other companies, AbbVie’s market capitalization and consolidated financial strength, the absence of a financing condition in the merger agreement, the fact that AbbVie has the financial capacity to consummate the merger and Soliton’s ability to seek specific performance to prevent breaches of the merger agreement and to enforce specifically the terms of the merger agreement;

 

   

the terms of the merger agreement, including:

 

   

Soliton’s ability, under certain circumstances, prior to the time Soliton stockholders adopt the merger agreement, to consider and respond to a bona fide takeover proposal or engage in discussions or negotiations with the person making such a proposal if the Board shall have determined in good faith (after consultation with its financial advisor and outside legal counsel) that such takeover proposal either constitutes or would be reasonably expected to result in a superior proposal and the failure to take such action would be inconsistent with the directors’ fiduciary duties under applicable law;

 

   

Soliton’s ability, under certain circumstances, to terminate the merger agreement in order to enter into an agreement providing for a superior proposal, provided that Soliton complies with its obligations relating to the entering into of any such agreement and prior to or concurrently with the termination of the merger agreement pays a termination fee of $18,625,000, which each of the SAC and the Board concluded was reasonable in the context of termination fees payable in comparable transactions and in light of the overall terms of the merger agreement, including the merger consideration;

 

   

the ability of the Board, under certain circumstances not involving a superior proposal, to change its recommendation that Soliton stockholders vote in favor of the adoption of the merger agreement; and

 

   

the fact that the merger agreement provides that, in the event of a failure of the merger to be consummated under certain circumstances related to the failure to obtain required regulatory approvals, AbbVie will be required to pay Soliton a reverse termination fee of up to $20,000,000, without Soliton having to establish any damages;

 

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the belief that the terms of the merger agreement, taken as a whole, provide protection against the risk that the consummation of the merger is delayed or that the merger cannot be completed, including due to required regulatory approvals, based on, among other things:

 

   

the covenants contained in the merger agreement obligating each of the parties to use reasonable best efforts to cause the merger to be consummated;

 

   

the SAC’s and the Board’s belief that the outside date for completing the merger under the merger agreement on which either party, subject to certain exceptions, can terminate the merger agreement allows for sufficient time to consummate the merger and consummate the transactions contemplated by the merger agreement;

 

   

the absence of a financing condition in the merger agreement; and

 

   

the likelihood and anticipated timing of consummating the merger in light of the scope of the conditions to closing;

 

   

the fact that the merger is not conditioned upon any member of Soliton’s management or the Board entering into any employment, equity contribution or other agreement or arrangement with Soliton or AbbVie, and that no such agreement or arrangement existed as of the date of the merger agreement (other than the Support Agreements);

 

   

the fact that the Support Agreements terminate if the merger agreement terminates so the Support Agreements do not prevent Soliton from entering into a superior proposal;

 

   

the belief that the terms of the merger agreement, taken as a whole, including the parties’ representations, warranties and covenants, and the conditions to the parties’ respective obligations, are reasonable;

 

   

the fact that a vote of the holders of Soliton common stock is required under Delaware law to approve the merger agreement; and

 

   

the risk that pursuing other potential alternatives, including continuing to operate on a standalone basis, could have resulted in the loss of an opportunity to consummate a transaction with AbbVie.

In the course of its deliberations, each of the SAC and the Board also considered a variety of risks and other countervailing factors related to the merger agreement and the merger, including the following material factors:

 

   

the potential upside in Soliton’s standalone strategic plan;

 

   

the fact that certain potential indications for the RESONIC console that are currently speculative might prove to be valuable in the future;

 

   

the possibility that the merger might not be consummated in a timely manner or at all due to a failure of certain conditions, including with respect to the required approval of the transaction by antitrust regulatory authorities;

 

   

the risks and costs to Soliton if the merger does not close in a timely manner or at all, including the potential negative impact on Soliton’s ability to retain key employees, the diversion of management and employee attention and the potential disruptive effect on Soliton’s day-to-day operations and Soliton’s relationships with customers, suppliers and other third parties;

 

   

the fact that Soliton’s stockholders will have no ongoing equity interest in the surviving corporation following the merger, meaning that Soliton’s stockholders will not (by virtue of their holding Soliton common stock) participate in AbbVie’s or Soliton’s future earnings or growth;

 

   

the restrictions on the conduct of Soliton’s business prior to the consummation of the merger, which may delay or prevent Soliton from undertaking business opportunities that may arise or any other action that it might otherwise take with respect to the operations and strategy of Soliton;

 

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the risk that the parties may incur significant costs and delays resulting from seeking governmental consents and approvals necessary for completion of the merger;

 

   

the provisions of the merger agreement that restrict Soliton’s ability to solicit or participate in discussions or negotiations regarding alternative transactions, subject to specified exceptions, and that require Soliton to negotiate with AbbVie (if AbbVie desires to negotiate) prior to Soliton being able to terminate the merger agreement to accept a superior proposal;

 

   

the possibility that Soliton’s obligation to pay AbbVie a termination fee of $18,625,000 upon the termination of the merger agreement under certain circumstances could discourage other potential acquirors from making an alternative proposal to acquire Soliton;

 

   

the significant costs involved in connection with negotiating the merger agreement and completing the merger, including in connection with any litigation that may result from the announcement or pendency of the merger, and the fact that if the merger is not consummated, Soliton may be required to bear such costs;

 

   

the risk of litigation in connection with the execution of the merger agreement and the completion of the merger; and

 

   

the fact that an all-cash transaction would be taxable to the holders of Soliton common stock that are U.S. holders for U.S. federal income tax purposes.

In addition, the SAC and the Board were aware of and considered the fact that Soliton’s executive officers and directors have financial interests in the merger that may be different from, or in addition to, those of Soliton’s stockholders generally, including those interests that are a result of employment and compensation arrangements with Soliton, as described more fully below in the section entitled “—Interests of Directors and Executive Officers in the Merger.”

This explanation of the SAC’s and the Board’s reasons for recommending the adoption of the merger agreement and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors described in the section of this proxy statement entitled “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 17.

Opinion of Financial Advisor

Overview

The SAC retained Guggenheim Securities as its financial advisor in connection with a potential sale of Soliton, including the merger. In selecting Guggenheim Securities as its financial advisor, the SAC considered that, among other things, Guggenheim Securities is an internationally recognized investment banking, financial advisory and securities firm whose senior professionals have substantial experience advising companies in, among other industries, the aesthetic medical device industry. Guggenheim Securities, as part of its investment banking, financial advisory and capital markets businesses, is regularly engaged in the valuation and financial assessment of businesses and securities in connection with mergers and acquisitions, recapitalizations, spin-offs/split-offs, restructurings, securities offerings in both the private and public capital markets and valuations for corporate and other purposes.

At the May 8, 2021 meetings of the SAC and the Board, Guggenheim Securities rendered an oral opinion, which was confirmed by delivery of a written opinion, to the SAC (which opinion was also provided to the Board at the SAC’s request and with the SAC’s authorization) to the effect that, as of May 8, 2021 and based on and subject to the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken, the merger consideration was fair, from a financial point of view, to the holders of Soliton common stock.

This description of Guggenheim Securities’ opinion is qualified in its entirety by the full text of the written opinion, which is attached as Annex D to this proxy statement and which you should read carefully and in its

 

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entirety. Guggenheim Securities’ written opinion sets forth the matters considered, the procedures followed, the assumptions made and various limitations of and qualifications to the review undertaken by Guggenheim Securities. Guggenheim Securities’ written opinion, which was authorized for issuance by the Fairness Opinion and Valuation Committee of Guggenheim Securities, is necessarily based on economic, business, capital markets and other conditions, and the information made available to Guggenheim Securities, as of the date of such opinion. As Soliton is aware, global economic conditions and the global capital markets have been experiencing and remain subject to significant volatility, and Guggenheim Securities expresses no view or opinion as to any potential effects of such volatility on Soliton, AbbVie or the merger or financing thereof. Guggenheim Securities has no responsibility for updating or revising its opinion based on facts, circumstances or events occurring after the date of the rendering of the opinion.

In reading the discussion of Guggenheim Securities’ opinion set forth below, you should be aware that such opinion (and, as applicable, any materials provided in connection therewith or the summary of Guggenheim Securities’ underlying financial analyses elsewhere in this proxy statement):

 

   

was provided to the SAC and, at the SAC’s request and with the SAC’s authorization, to the Board (solely in their respective capacities as such), in each case, for their respective information and assistance in connection with their respective evaluation of the merger consideration;

 

   

did not constitute a recommendation to the SAC or the Board with respect to the merger;

 

   

does not constitute advice or a recommendation to any holder of Soliton common stock as to how to vote or act in connection with the merger or otherwise;

 

   

did not address Soliton’s underlying business or financial decision to pursue or effect the merger, the relative merits of the merger as compared to any alternative business or financial strategies that might exist for Soliton, the financing or funding of the merger by AbbVie or the effects of any other transaction in which Soliton might engage;

 

   

addressed only the fairness, from a financial point of view and as of the date of such opinion, of the merger consideration to the extent expressly specified in such opinion;

 

   

expressed no view or opinion as to (i) any other term, aspect or implication of (a) the merger (including, without limitation, the form or structure of the merger) or the merger agreement or (b) any support agreement or any other agreement, transaction document or instrument contemplated by the merger agreement or to be entered into or amended in connection with the merger or (ii) the fairness, financial or otherwise, of the merger to, or of any consideration to be paid to or received by, the holders of any class of securities (other than as expressly specified in such opinion), creditors or other constituencies of Soliton;

 

   

expressed no view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation payable to or to be received by any of Soliton’s directors, officers or employees, or any class of such persons, in connection with the merger relative to the merger consideration or otherwise;

 

   

did not address the individual circumstances of specific holders of Soliton’s securities (including stock options, restricted stock units and warrants) with respect to rights or aspects that may distinguish such holders or Soliton’s securities (including stock options, restricted stock units and warrants) held by such holders;

 

   

did not address, take into consideration or give effect to any rights, preferences, restrictions or limitations or other attributes of any such securities (including stock options, restricted stock units and warrants); and

 

   

did not in any way address proportionate allocation or relative fairness.

In connection with rendering its opinion, Guggenheim Securities:

 

   

reviewed a draft of the merger agreement dated May 7, 2021;

 

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reviewed certain publicly available business and financial information regarding Soliton;

 

   

reviewed certain non-public business and financial information regarding Soliton’s business and future prospects (including the Soliton projections and certain estimates as to potentially realizable existing net operating loss carryforwards expected to be utilized by Soliton, which are summarized below under “—Certain Unaudited Prospective Financial Information” and certain other estimates and other forward-looking information), all as prepared and approved for Guggenheim Securities’ use by Soliton’s senior management (collectively, the “Soliton-Provided Information”);

 

   

discussed with Soliton’s senior management their strategic and financial rationale for the merger as well as their views of Soliton’s business, operations, historical and projected financial results, future prospects and the commercial, competitive and regulatory dynamics in the medical device and aesthetics sectors;

 

   

performed discounted cash flow analyses based on the Soliton projections;

 

   

reviewed the valuation and financial metrics of certain mergers and acquisitions that Guggenheim Securities deemed relevant in evaluating the merger;

 

   

reviewed the historical prices and trading activity of Soliton common stock;

 

   

compared the financial performance of Soliton and the trading multiples and trading activity of Soliton common stock with corresponding data for certain other publicly traded companies that Guggenheim Securities deemed relevant in evaluating Soliton; and

 

   

conducted such other studies, analyses, inquiries and investigations as Guggenheim Securities deemed appropriate.

With respect to the information used in arriving at its opinion, Guggenheim Securities noted that:

 

   

Guggenheim Securities relied upon and assumed the accuracy, completeness and reasonableness of all industry, business, financial, legal, regulatory, tax, accounting, actuarial and other information provided by or discussed with Soliton (including, without limitation, the Soliton-Provided Information) or obtained from public sources, data suppliers and other third parties.

 

   

Guggenheim Securities (i) did not assume any responsibility, obligation or liability for the accuracy, completeness, reasonableness, achievability or independent verification of, and did not independently verify, any such information (including, without limitation, the Soliton-Provided Information), (ii) expressed no view or opinion regarding the (a) reasonableness or achievability of the Soliton projections, any other estimates and other forward-looking information provided by Soliton or the assumptions upon which they are based or (b) probability adjustments reflected in the Soliton projections and (iii) relied upon the assurances of Soliton’s senior management that they were unaware of any facts or circumstances that would make the Soliton-Provided Information incomplete, inaccurate or misleading.

 

   

Specifically, with respect to (i) the Soliton projections utilized in its analyses, (a) Guggenheim Securities was advised by Soliton’s senior management, and assumed, that the Soliton projections (including the probability adjustments reflected therein and the expected development and commercialization of Soliton’s products and product candidates), had been reasonably prepared on bases reflecting the best currently available estimates and judgments of Soliton’s senior management as to the expected future performance of Soliton on a standalone basis and (b) Guggenheim Securities assumed that the Soliton projections had been reviewed by the Board and the SAC with the understanding that such information would be used and relied upon by Guggenheim Securities in connection with rendering its opinion and (ii) any financial projections/forecasts, any other estimates and/or any other forward-looking information obtained by Guggenheim Securities from public sources, data suppliers and other third parties, Guggenheim Securities assumed that such information was reasonable and reliable. Furthermore, in assessing and utilizing the Soliton projections for purposes of

 

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its financial analyses and opinion, Guggenheim Securities took into account its various discussions with the Board and the SAC and Soliton’s senior management regarding the risks and uncertainties of achieving the Soliton projections, including the three alternative scenarios described therein, in light of (i) the current and prospective aesthetic medical device industry conditions and competitive dynamics facing Soliton, (ii) Soliton’s recent financial performance, (iii) the key commercial, operational and financial drivers of the scenarios described in the Soliton projections and (iv) various other facts and circumstances regarding the Soliton projections.

Guggenheim Securities also noted certain other considerations with respect to its engagement and the rendering of its opinion:

 

   

During the course of its engagement, Guggenheim Securities engaged in discussions with certain potential strategic acquirors and private equity firms at the direction of the SAC and considered the outcome of such discussions in rendering its opinion.

 

   

Guggenheim Securities did not perform or obtain any independent appraisal of the assets or liabilities (including any contingent, derivative or off-balance sheet assets and liabilities) of Soliton or any other entity or the solvency or fair value of Soliton or any other entity, nor was Guggenheim Securities furnished with any such appraisals.

 

   

Guggenheim Securities’ professionals are not legal, regulatory, tax, consulting, accounting, appraisal or actuarial experts and Guggenheim Securities’ opinion should not be construed as constituting advice with respect to such matters; accordingly, Guggenheim Securities relied on the assessments of Soliton’s senior management and Soliton’s other professional advisors with respect to such matters. Guggenheim Securities did not express any view or render any opinion regarding the tax consequences of the merger to Soliton or its securityholders.

 

   

Guggenheim Securities further assumed that:

 

   

In all respects meaningful to its analyses, (i) the final executed form of the merger agreement would not differ from the draft that Guggenheim Securities reviewed, (ii) each of Soliton, AbbVie and Merger Sub will comply with all terms and provisions of the merger agreement and (iii) the representations and warranties of Soliton, AbbVie and Merger Sub contained in the merger agreement were true and correct and all conditions to the obligations of each party to the merger agreement to consummate the merger will be satisfied without any waiver, amendment or modification thereof; and

 

   

The merger will be consummated in a timely manner in accordance with the terms of the merger agreement and in compliance with all applicable legal and other requirements, without any delays, limitations, restrictions, conditions, divestiture or other requirements, waivers, amendments or modifications (regulatory, tax-related or otherwise) that would have an effect on Soliton, AbbVie, Merger Sub or the merger in any way meaningful to Guggenheim Securities’ analyses or opinion.

 

   

Guggenheim Securities did not express any view or opinion as to the price or range of prices at which Soliton common stock or other securities or financial instruments of or relating to Soliton may trade or otherwise be transferable at any time, including subsequent to the announcement or consummation of the merger.

Summary of Financial Analyses

Overview of Financial Analyses

This “Summary of Financial Analyses” presents a summary of the principal financial analyses performed by Guggenheim Securities and presented to the SAC and the Board in connection with Guggenheim Securities’ rendering of its opinion. Such presentation to the SAC and the Board was supplemented by Guggenheim Securities’ oral discussion, the nature and substance of which may not be fully described herein.

 

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Some of the financial analyses summarized below include summary data and information presented in tabular format. In order to understand fully such financial analyses, the summary data and tables must be read together with the full text of the summary. Considering the summary data and tables alone could create a misleading or incomplete view of Guggenheim Securities’ financial analyses.

The preparation of a fairness opinion is a complex process and involves various judgments and determinations as to the most appropriate and relevant financial analyses and the application of those methods to the particular circumstances involved. A fairness opinion therefore is not readily susceptible to partial analysis or summary description, and taking portions of the financial analyses set forth below, without considering such analyses as a whole, would in Guggenheim Securities’ view create an incomplete and misleading picture of the processes underlying the financial analyses considered in rendering Guggenheim Securities’ opinion.

In arriving at its opinion, Guggenheim Securities:

 

   

based its financial analyses on various assumptions, including assumptions concerning general economic, business and capital markets conditions and industry-specific and company-specific factors, all of which are beyond the control of Soliton, AbbVie and Guggenheim Securities;

 

   

did not form a view or opinion as to whether any individual analysis or factor, whether positive or negative, considered in isolation, supported or failed to support its opinion;

 

   

considered the results of all of its financial analyses and did not attribute any particular weight to any one analysis or factor; and

 

   

ultimately arrived at its opinion based on the results of all of its financial analyses assessed as a whole and believes that the totality of the factors considered and the various financial analyses performed by Guggenheim Securities in connection with its opinion operated collectively to support its determination as to the fairness, from a financial point of view and as of the date of such opinion, of the merger consideration pursuant to the merger to the extent expressly specified in such opinion.

With respect to the financial analyses performed by Guggenheim Securities in connection with rendering its opinion:

 

   

Such financial analyses, particularly those based on estimates and projections, are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by these analyses.

 

   

None of the selected publicly traded companies used in the discounted future value analysis or selected publicly traded companies analysis described below is identical or directly comparable to Soliton, and none of the selected precedent merger and acquisition transactions used in the selected precedent merger and acquisition transactions analysis described below is identical or directly comparable to the merger. However, such companies and transactions were selected by Guggenheim Securities, among other reasons, because they represented publicly traded companies or involved target companies that may be considered broadly similar, for purposes of Guggenheim Securities’ financial analyses, to Soliton and the merger based on Guggenheim Securities’ familiarity with the aesthetic medical device industry.

 

   

In any event, the discounted future value, selected publicly traded companies and selected precedent merger and acquisition transactions analyses are not mathematical. Rather, such analyses involve complex considerations and judgments concerning the differences in business, operating, financial and capital markets-related characteristics and other factors regarding the selected publicly traded companies to which Soliton was compared and the selected precedent merger and acquisition transactions to which the merger was compared.

 

   

Recent global recessionary economic conditions and the ongoing global financial crisis have together created increased stock price volatility; accordingly, certain precedent merger and acquisition transactions announced before the onset of such recent global economic recession conditions and the

 

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global financial crisis may be less relevant or irrelevant for purposes of Guggenheim Securities’ selected precedent merger and acquisition transactions analysis.

 

   

Such financial analyses do not purport to be appraisals or to reflect the prices at which any securities may trade at the present time or at any time in the future.

Certain Definitions

Throughout this section entitled “Summary of Financial Analyses,” the following defined terms are used in connection with Guggenheim Securities’ various financial analyses:

 

   

CY: means calendar year

 

   

EBITDA: means the relevant company’s operating earnings (after deduction of stock-based compensation) before interest, taxes, depreciation and amortization.

 

   

Enterprise value: represents the relevant company’s net equity value (as defined below) plus (i) the principal or face amount of total debt, less (ii) cash, cash equivalents, and short- and long-term marketable investments.

 

   

Net equity value: represents the relevant company’s (i) gross equity value as calculated (a) based on outstanding shares of common stock, restricted stock units and performance stock units (in each of the foregoing cases, as applicable) plus shares issuable upon the conversion or exercise of all in-the-money convertible securities, stock options and/or stock warrants, multiplied by (b) the relevant company’s stock price, less (ii) the cash proceeds from the assumed exercise of all in-the-money stock options and stock warrants.

 

   

NTM: means next twelve months

 

   

Unlevered free cash flow: means the relevant company’s after-tax unlevered operating cash flow minus capital expenditures and changes in working capital.

 

   

VWAP: means volume-weighted average share price over the indicated period of time.

 

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Recap of Implied Merger Financial Metrics

Based on the merger consideration of $22.60 in cash per share of Soliton common stock, Guggenheim Securities calculated various merger-implied premia (relative to Soliton’s stock price as of May 7, 2021, the last trading day prior to the announcement of the merger) and merger-implied multiples as outlined in the table below:

Merger-Implied Premia and Merger-Implied Multiples

 

Merger Consideration per Share of Soliton Common Stock

   $ 22.60  

 

     Price Per
Share of
Soliton
Common
Stock
        

Acquisition Premium/(Discount) Relative to Soliton’s:

     

Closing Stock Price @ 5/7/21

   $ 18.00        26

VWAPs @ 5/7/21:

     

10-Day

     17.46        29  

30-Day

     16.87        34  

90-Day

     15.55        45  

52-Week High Closing Stock Price

     18.85        20  

Transaction Enterprise Value / Revenue:

     

NTM @ 3/31/2021—Base Scenario Management Estimates

        63.5

Wall Street Estimates

        72.5  

2022E—Base Scenario Management Estimates

        19.4  

Wall Street Estimates

        21.5  

2023E—Base Scenario Management Estimates

        7.8  

Wall Street Estimates

        8.1  

Soliton Change-of-Control Financial Analyses

Recap of Soliton Change-of-Control Financial Analyses. In evaluating Soliton in connection with rendering its opinion, Guggenheim Securities performed various financial analyses which are summarized in the table below and described in more detail elsewhere herein, including discounted cash flow analyses and discounted future value analysis based on selected publicly traded companies analysis. Solely for informational reference purposes, Guggenheim Securities also performed selected publicly traded companies analysis and precedent merger and acquisition transactions analysis, and reviewed premiums paid in connection with selected precedent merger and acquisition transactions, Wall Street equity research analysts’ stock price targets for the Soliton common stock and the historical stock price range for the Soliton common stock.

 

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Recap of Soliton Change-of-Control Financial Analyses

 

Merger Consideration per Share of Soliton Common Stock

   $22.60

 

     Reference Range
for Soliton on
a Change-of-
Control Basis(1)
 

Financial Analyses

   Low      High  

Discounted Cash Flow Analyses(2)

     

Based on the Base Scenario

   $ 16.90      $ 26.55  

Based on the Moderate Growth Scenario

     11.30        18.05  

Based on the Outperform Scenario

     22.90        35.25  

Discounted Future Value Analysis Based on Selected Publicly Traded Companies Analysis

   $ 15.95      $ 22.90  

For Informational Reference Purposes

             

Selected Publicly Traded Companies Analysis

   $ 8.95      $ 11.10  

Selected Precedent M&A Transaction Analysis:

     

NTM Revenue

   $ 5.95      $ 7.70  

2022E Revenue

     9.50        12.75  

Selected Precedent M&A Premiums Analysis:(3)

     

Premium to 1-day

   $ 21.60      $ 27.00  

Premium to 52-week High

     16.95        21.70  

Wall Street Equity Research Stock Price Targets(4)

   $ 12.40      $ 26.55  

Soliton’s Stock Price Range During Past Year

   $ 6.02      $ 18.85  

 

(1)

Rounded to the nearest $0.05.

(2)

Includes approximately $0.70 to $0. 80 per share attributable to the estimated present value of Soliton’s net operating loss carryforwards.

(3)

Based on approximate 25th to 75th percentile of precedent premiums analysis of selected medical technology acquisitions since 2015.

(4)

Wall Street 12-month stock price targets are discounted by one year using Soliton’s estimated cost of equity midpoint of 13.0%.

Discounted Cash Flow Analyses. Guggenheim Securities performed stand-alone discounted cash flow analyses of Soliton based on projected after-tax unlevered free cash flows (after deduction of stock-based compensation) for Soliton and an estimate of its terminal/continuing value at the end of the projection horizon.

In performing its discounted cash flow analyses with respect to Soliton:

 

   

Guggenheim Securities utilized Soliton management’s forecasts for Soliton for the fiscal years ending December 31, 2021 through December 31, 2026 reflecting three illustrative scenarios identified to Guggenheim Securities by Soliton as the “Base Scenario,” the “Moderate Growth Scenario” and the “Outperform Scenario” (which contained probability-adjusted financial projections) and certain estimates as to potentially realizable existing net operating loss carryforwards expected to be utilized by Soliton and certain other estimates and other forward-looking information, all as prepared for Guggenheim Securities’ use by Soliton’s senior management and approved for Guggenheim Securities’ use by the SAC, the Board and Soliton’s senior management. Guggenheim Securities notes the previous description of and caveats regarding the forecasts for Soliton in the above section entitled “Recap of Soliton Change-of-Control Financial Analyses.” For more detail regarding the forecasts, see the section entitled “—Certain Unaudited Prospective Financial Information” beginning on page 54.

 

   

Guggenheim Securities used a discount rate range of 11.55% – 14.30% based on its estimate of Soliton’s weighted average cost of capital.

 

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In estimating Soliton’s terminal/continuing value for purposes of its discounted cash flow analysis, Guggenheim Securities used a perpetual growth rate range of 2.0% to 3.0%, which range was selected based on Guggenheim Securities’ professional judgment and experience. Guggenheim Securities applied a two-stage methodology to calculate the terminal value, which was discussed with Soliton’s senior management. During the first stage of the terminal value, free cash flow growth decelerates linearly to the assumed perpetuity growth rate, and thereafter the perpetuity growth rate is applied. Based on the direction of Soliton’s senior management, the first stage of the terminal value for the Base Scenario and the Moderate Growth Scenario ends in 2031, while the first stage of the terminal value for the Outperform Scenario ends in 2030.

Guggenheim Securities’ discounted cash flow analyses resulted in overall per share reference ranges (rounded to the nearest $0.05) for purposes of evaluating the Soliton common stock on a stand-alone intrinsic-value basis as outlined in the table below.

Recap of Soliton Stand-Alone DCF Analysis

 

     Low      High  

The Base Scenario

   $ 16.90      $ 26.55  

The Moderate Growth Scenario

     11.30        18.05  

The Outperform Scenario

     22.90        35.25  

Discounted Future Value Analysis Based on Selected Publicly Traded Companies Analysis. Guggenheim Securities reviewed and analyzed Soliton’s historical stock price performance, trading metrics and historical and projected/forecasted financial performance compared to corresponding data for selected publicly traded companies that Guggenheim Securities deemed relevant for purposes of this analysis. Guggenheim Securities calculated, among other things, various public market trading multiples for the selected publicly traded companies (in the case of the selected publicly traded companies, based on Wall Street equity research consensus estimates and each company’s most recent publicly available financial filings), which are summarized in the table below:

Selected Publicly Traded Companies Analysis

 

     Trading
Enterprise
Value /
CY 2021E
Revenue
     Trading
Enterprise
Value /
CY 2022E
Revenue
 

Cutera, Inc.

     2.7      2.4

Establishment Labs Holdings, Inc.

     14.8        11.8  

InMode Ltd.

     10.7        8.9  

Sientra, Inc.

     4.7        3.8  

Venus Concept Inc

     1.4        1.2  

In performing its discounted future value analysis based on the selected publicly traded companies analysis with respect to Soliton, Guggenheim Securities selected a reference range of trading enterprise value / CY2021E revenue multiple for purposes of evaluating Soliton of 7.0x to 10.0x and applied this multiple to Soliton Base Scenario 2023E revenue, the projection year when Soliton would begin to have commercial scale more comparable to the publicly tradable companies Guggenheim Securities deemed relevant. This analysis produced a future value per share as of December 31, 2022 of $19.79 to $27.62 per share.

Utilizing Guggenheim Securities’ estimate for Soliton’s cost of equity of 12.0% to 14.0%, the discounted future value analysis resulted in an overall reference range of $15.95 to $22.90 per share of Soliton common stock as of May 7, 2021.

 

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Other Financial Reviews and Analyses Solely for Informational Reference Purposes

In order to provide certain context for the financial analyses in connection with its opinion as described above, Guggenheim Securities undertook various additional financial reviews and analyses as summarized below solely for informational reference purposes. As a general matter, Guggenheim Securities did not consider such additional financial reviews and analyses to be determinative methodologies for purposes of its opinion.

Selected Publicly Traded Companies Analysis. In performing its selected publicly traded companies analysis with respect to Soliton (as referenced in the above table), Guggenheim Securities selected a trading enterprise value / revenue multiple range of 6.5x to 8.5x based on CY2022E for purposes of evaluating Soliton on a stand-alone public market trading basis. Guggenheim Securities’ selected publicly traded companies analysis resulted in an overall reference range of $8.95 to $11.10 per share for purposes of evaluating Soliton on a stand-alone public market trading basis.

Selected Precedent Merger and Acquisition Transactions Analysis. Guggenheim Securities reviewed and analyzed financial metrics associated with selected precedent merger and acquisition transactions announced since 2017 involving a target company in the medical device sector with transaction values ranging from $100 million to $2 billion and forward revenue growth of over 20% that Guggenheim Securities deemed relevant for purposes of this analysis. Guggenheim Securities calculated, among other things and to the extent publicly available, certain implied change-of-control transaction multiples for the selected precedent merger and acquisition transactions (based on Wall Street equity research estimates, each company’s most recent publicly available financial filings and certain other publicly available information), which are summarized in the table below:

Selected Precedent Merger and Acquisition Transactions Analysis

 

Date Announced

  

Acquiror

  

Target Company

   Upfront
Enterprise
Value /
NTM
Revenue(1)
    Total
Enterprise
Value /
NTM
Revenue(2)
 

3/30/17

   Boston Scientific Corporation    Symetis SA      7.5     7.5

6/19/17

   Stryker Corporation    NOVADAQ Technologies Inc.      6.0       6.0  

9/5/17

   Teleflex Urology Limited    NeoTract, Inc.      4.9       7.4  

10/24/17

   Stryker Corporation    VEXIM      5.5       5.5  

12/7/17

   Stryker Corporation    Entellus Medical, Inc.      5.8       5.8  

3/15/18

   Orthofix International N.V.    Spinal Kinetics Inc.      2.9       6.7  

3/21/18

   Boston Scientific Corporation    NxThera, Inc.      9.7       12.8  

8/27/18

   Wright Medical Group, Inc.    Cartiva, Inc.      10.4       10.4  

9/6/18

   Boston Scientific Corporation    Augmenix, Inc.      6.5       7.8  

9/11/18

   Stryker Corporation    Invuity, Inc.      3.8       3.8  

9/20/18

   Medtronic plc    Mazor Robotics Ltd.      18.6       18.6  

9/26/18

   Hologic, Inc.    Focal Therapeutics, Inc.      6.3       6.3  

12/13/18

   CONMED Corporation    Buffalo Filter LLC      7.6       7.6  

5/9/19

   Boston Scientific Corporation    Vertiflex, Inc.      6.5       6.5  

1/19/21

   Hill-Rom, Inc.    Bardy Diagnostics, Inc.      10.0       11.3 (3) 

1/20/21

   Haemonetics Corporation    Cardiva Medical, Inc.      6.7       7.2  

1/21/21

   Boston Scientific Corporation    Preventice Solutions, Inc.      4.5 (4)      6.0 (4) 

2/25/21

   Axonics Modulation Technologies, U.K. Limited    Contura Holdings Limited      13.3 (5)      15.7 (5) 

Statistical Summary

                 

Mean

     7.6     8.6

Median

     6.5       7.4  

 

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(1)

Indicates announced transaction value, assuming no achievement of any disclosed earn-out, expressed as a multiple of NTM revenue.

(2)

Indicates announced transaction value, assuming full achievement of any disclosed earn-out, expressed as a multiple of NTM revenue.

(3)

Includes $50 million earnout per Wall Street research and credit for $20 million of net operating loss carryforwards, implied upfront multiple of 9.5x and total multiple of 10.8x.

(4)

NTM revenue extrapolated based on assumed 30% revenue growth.

(5)

Represents 2021E revenue.

In performing its selected precedent merger and acquisition transactions analysis with respect to Soliton, Guggenheim Securities selected a reference range of transaction multiples for purposes of evaluating Soliton on a change-of-control basis as follows: (i) transaction enterprise value / NTM revenue multiple range of 7.0x to 10.0x, which resulted in an overall reference range of $5.95 to $7.70 per share; and (ii) transaction enterprise value / 2022E revenue multiple range of 7.0x to 10.0x, which resulted in an overall reference range of $9.50 to $12.75 per share.

Premia/(Discounts) Paid in Selected Precedent Merger and Acquisition Transactions. Guggenheim Securities reviewed, based on publicly available information, the implied one-day and 52-week high closing premia/(discounts) paid or proposed to be paid in connection with selected transactions involving all-cash acquisitions of medical technology companies with transaction values between $100 million and $1 billion, since 2015. Based on an approximate 25th and 75th percentile of the precedent one-day stock price premiums, Guggenheim Securities noted that the range of such one-day stock price premia was 20% to 50%, implying share prices of $21.60 to $27.00 based on the closing share price of Soliton common stock of $18.00 on May 7, 2021. Based on an approximate 25th and 75th percentile of the precedent 52-week high stock price premia/(discounts), Guggenheim Securities noted that the range of such 52-week high premia/(discounts) was (10%) to 15%, implying per share prices of $16.95 to $21.70 based on the 52-week high closing price of Soliton common stock of $18.85 as of May 7, 2021.

 

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Premia / (Discounts) Paid in Selected Precedent Merger and Acquisition Transactions

 

Date Announced

  

Acquiror

  

Target Company

   Premium
to 1 Day
    Premium
to 52-Week
High
 

12/17/20

   Alphatec Holdings, Inc    EOS Imaging SA      42     (0 %) 

7/30/20

   PAI Partners SAS    Amplitude Surgical SAS      55       43  

7/15/20

   Medtronic Plc    Medicrea International SA      39       15  

3/12/19

   Smith & Nephew PLC    Osiris Therapeutics, Inc.      1       (0

2/12/19

   Edwards Lifesciences Corp.    CAS Medical Systems, Inc.      56       (8

9/11/18

   Stryker Corp.    Invuity, Inc.      29       (21

4/10/18

   Altaris Capital Partners LLC    Analogic Corp.      25 (1)      (12 )(2) 

3/12/18

   LABORIE Medical Technologies, Inc.    Cogentix Medical, Inc.      14       1  

12/7/17

   Stryker Corp.    Entellus Medical, Inc.      50       0  

12/4/17

   TPG Capital LLC    Exactech, Inc.      54 (2)      18 (2) 

6/19/17

   Stryker Corp.    NOVADAQ Technologies Inc.      49       (28

4/3/17

   Apax Partners    Syneron Candela      18 (3)      13 (3) 

1/11/17

   Integra LifeSciences
Holdings Corp.
   Derma Sciences, Inc.      40       1  

12/2/16

   Teleflex Incorporated    Vascular Solutions      2       0  

9/27/16

   Boston Scientific Corp.    EndoChoice Holdings, Inc.      90       (35

5/2/16

   RoundTable Healthcare Management, Inc.    Symmetry Surgical, Inc.      26       23  

11/20/15

   CR Bard, Inc.    Liberator Medical Holdings, Inc.      26       (13

9/2/15

   Valeant Pharmaceuticals    Synergetics USA, Inc.      71       14  

6/18/15

   XIO (UK) LLP    Lumenis Ltd.      16       3  

Statistical Summary

 

Mean

     37     1

Median

     39     0

25th Percentile

     21     (10 %) 

75th Percentile

     52     13

Wall Street Equity Research Analyst Stock Price Targets. Guggenheim Securities reviewed selected Wall Street equity research analyst stock price targets for Soliton as published prior to May 7, 2021 (the last trading day prior to the announcement of the merger). Guggenheim Securities noted that such Wall Street equity research analyst stock price targets for Soliton common stock were $12.40 to $26.55 per share on a present value basis using an illustrative discount rate of 13.0% (which reflected Guggenheim Securities’ estimate of the midpoint of Soliton’s cost of equity).

52-Week Closing High and Low Stock Prices. Guggenheim Securities reviewed the trading price of Soliton common stock over the 52-week period ending on May 7, 2021 (the last trading day prior to the announcement of the merger). Among other things, Guggenheim Securities noted that the range of such 52-week closing high and low trading prices was $6.02 to $18.85 per share.

Illustrative Theoretical Future Stock Price. Guggenheim Securities reviewed implied illustrative ranges of theoretical future values per share at December 31, 2022 and December 31, 2023 on a stand-alone basis utilizing projected revenues from the Base Scenario management estimates, and also assuming a $50 million equity financing at a 15% discount to the May 7, 2021 closing stock price, per Soliton management. Among other things, Guggenheim Securities noted that, based on an illustrative NTM revenue multiple range of 7.0x to 10.0x, the theoretical future values per share at December 31, 2022 were approximately $17.55 to $24.53, and $14.34 to $20.05 on a present value basis, using an illustrative discount rate of 13.0% (which reflected Guggenheim

 

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Securities’ estimate of the midpoint of Soliton’s cost of equity). Guggenheim Securities also noted that, based on an illustrative NTM revenue multiple range of 7.0x to 10.0x, the theoretical future values per share at December 31, 2023 were approximately $30.60 to $43.02, and $22.13 to $31.12 on a present value basis, using an illustrative discount rate of 13.0% (which reflected Guggenheim Securities’ estimate of the midpoint of Soliton’s cost of equity).

Other Considerations

Except as described in the summary above, Soliton did not provide specific instructions to, or place any limitations on, Guggenheim Securities with respect to the procedures to be followed or factors to be considered in performing its financial analyses or providing its opinion. The type and amount of consideration payable in the merger were determined through negotiations between Soliton and AbbVie. The decision to enter into the merger agreement was solely that of the SAC and the Board. Guggenheim Securities’ opinion was just one of the many factors taken into consideration by the SAC and the Board. Consequently, Guggenheim Securities’ financial analyses should not be viewed as determinative of the decision of the SAC or the Board with respect to the fairness, from a financial point of view, of the merger consideration to holders of Soliton common stock.

Pursuant to the terms of Guggenheim Securities’ engagement, Soliton has agreed to pay Guggenheim Securities a cash transaction fee (based on a percentage of the aggregate value associated with the merger) upon consummation of the merger, which cash transaction fee currently is estimated to be $13.675 million, of which a cash milestone fee of $1,000,000 became payable upon the rendering of Guggenheim Securities’ opinion. In addition, Soliton has agreed to reimburse Guggenheim Securities for certain expenses and to indemnify it against certain liabilities arising out of its engagement.

Aside from its current engagement by Soliton, Guggenheim Securities has not been previously engaged during the past two years by Soliton, nor has Guggenheim Securities been previously engaged during the past two years by AbbVie, to provide financial advisory or investment banking services for which Guggenheim Securities received fees. Guggenheim Securities may seek to provide Soliton and AbbVie and their respective affiliates with financial advisory and investment banking services unrelated to the merger in the future, for which services Guggenheim Securities would expect to receive compensation.

Guggenheim Securities and its affiliates and related entities engage in a wide range of financial services activities for its and their own accounts and the accounts of customers, including but not limited to: asset, investment and wealth management; insurance services; investment banking, corporate finance, mergers and acquisitions and restructuring; merchant banking; fixed income and equity sales, trading and research; and derivatives, foreign exchange and futures. In the ordinary course of these activities, Guggenheim Securities and its affiliates and related entities may (i) provide such financial services to Soliton, AbbVie, other participants in the merger and their respective affiliates, for which services Guggenheim Securities and its affiliates and related entities may have received, and may in the future receive, compensation and (ii) directly and indirectly hold long and short positions, trade and otherwise conduct such activities in or with respect to loans, debt and equity securities and derivative products of or relating to Soliton, AbbVie, other participants in the merger and their respective affiliates. Furthermore, Guggenheim Securities and its affiliates and related entities and its or their respective directors, officers, employees, consultants and agents may have investments in Soliton, AbbVie, other participants in the merger and their respective affiliates.

Consistent with applicable legal and regulatory guidelines, Guggenheim Securities has adopted certain policies and procedures to establish and maintain the independence of its research departments and personnel. As a result, Guggenheim Securities’ research analysts may hold views, make statements or investment recommendations and publish research reports with respect to Soliton, AbbVie, other participants in the merger and their respective affiliates and the merger that differ from the views of Guggenheim Securities’ investment banking personnel.

 

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Certain Unaudited Prospective Financial Information

Soliton does not as a matter of course make public long-term projections as to future performance, earnings or other results, due to, among other reasons, the uncertainty of the underlying assumptions and estimates. However, in connection with the merger, Soliton’s management prepared three illustrative scenarios – the “Base Case Scenario,” the “Moderate Growth Scenario” and the “Outperform Scenario” – containing certain unaudited prospective financial information regarding Soliton’s operations for the fiscal years ending December 31, 2021 through December 31, 2026 (collectively, the “Soliton projections”).

The Base Case Scenario was based on numerous variables and assumptions, including assumptions for placement of RESONIC consoles and for the utilization of those consoles, for both tattoo and cellulite indications. Relative to the Base Case Scenario, the Moderate Growth Scenario assumed no change in the rate of RESONIC console placements, but significantly lower assumptions for the number of tattoo patients per console, and slightly lower assumptions for the number of cellulite patients per console. Relative to the Base Case Scenario, the Outperform Scenario assumed an accelerated rate of RESONIC console placements, and significantly higher assumptions for the number of cellulite patients per console to account for the potential future approval of indications for skin laxity and keloid. For certain of the information included in the Outperform Scenario, the Outperform Scenario also assumed a 60% probability of success for the approval and successful commercial launch of future skin laxity and keloid indications.

The Soliton projections were provided to the Board and to Soliton’s financial advisor, Guggenheim Securities, including in connection with Guggenheim Securities’ financial analyses described above under the section entitled “—Opinion of Financial Advisor.” The below summary of the Soliton projections is included for the purpose of providing stockholders access to certain nonpublic information that was furnished to the Board in connection with the merger (but not to AbbVie), and such information may not be appropriate for other purposes and is not included to influence the voting decision of any stockholder.

The Soliton projections were not prepared with a view toward public disclosure, the published guidelines of the SEC regarding projections, the use of non-GAAP financial measures or forward-looking statements, or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial projections. None of Soliton, Guggenheim Securities’ or their respective officers, directors, affiliates, advisors or other representatives considered, or now consider, the inclusion of the Soliton projections to be regarded as an indication that the Soliton projections are predictive of actual future events or results, and the Soliton projections should not be relied upon as such. You are cautioned not to place undue reliance on the Soliton projections. The Soliton projections included in this proxy statement have been prepared by, and are the responsibility of, Soliton’s management.

While presented with numeric specificity, the Soliton projections were based on numerous variables and assumptions that are inherently subjective and uncertain and are beyond the control of Soliton’s management. These assumptions include those related to aesthetic medical device industry performance and general business, economic, market and financial conditions as well as additional matters specific to Soliton’s business. Important factors that may affect actual results and cause the Soliton projections not to be achieved include risks and uncertainties relating to Soliton’s business (including its ability to achieve strategic goals, objectives and targets over applicable periods, particularly those related to the launch and commercialization of its RESONIC console), aesthetic medical device industry performance, general business and economic conditions and other factors described in the section entitled “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 17. The Soliton projections also reflect numerous variables, expectations and assumptions available when they were prepared regarding certain business decisions that are subject to change. As a result, actual results may differ materially from those contained in the Soliton projections.

Accordingly, there can be no assurance that the projected results summarized below will be realized. You should review Soliton’s most recent SEC filings for a description of the reported and anticipated results of

 

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operations and financial condition and capital resources, including in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Soliton’s Annual Report on Form 10-K for the year ended December 31, 2020 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2021. None of Soliton, Guggenheim Securities or their respective officers, directors, affiliates, advisors or other representatives can give you any assurance that actual results will not differ materially from the Soliton projections.

Soliton undertakes no obligation to update or otherwise revise or reconcile the Soliton projections to reflect circumstances existing after the date they were prepared or to reflect the occurrence of future events, even if any or all of the assumptions underlying the Soliton projections are shown to be in error. Because the Soliton projections cover multiple years, by their nature they become less predictive with each successive year.

Soliton has not made and makes no representation to AbbVie or any Soliton stockholder, in the merger agreement or otherwise, concerning the Soliton projections or regarding Soliton’s actual performance compared to the Soliton projections or that the projected results will be achieved. In light of the foregoing factors and the uncertainties inherent in the Soliton projections, Soliton urges you not to place undue reliance on such information and to review Soliton’s most recent SEC filings for a description of Soliton’s reported financial results.

Neither Dixon Hughes Goodman LLP, Soliton’s independent accountant, nor any other independent accountants have compiled, examined or performed any audit or other procedures with respect to the Soliton projections contained herein, nor have they expressed any opinion or any other form of assurance on the Soliton projections or their achievability.

Base Case Scenario

The following table presents a summary of the Base Case Scenario for the calendar years ending 2021 through 2026 for Soliton on a standalone basis.

 

     Year Ending December 31,  
     2021E     2022E     2023E     2024E      2025E      2026E  
     ($ in millions)  

Revenue

   $ 2     $ 28     $ 70     $ 125      $ 175      $ 244  

Gross Profit

     0       22       58       107        151        212  

Operating Expenses:

              

Research and Development

     8       8       8       8        12        16  

Selling and Marketing

     6       18       35       54        76        105  

General and Administrative

     13       15       19       21        22        25  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

EBITDA(1)

     (26     (18     (3     23        42        66  

Depreciation and Amortization

     1       1       1       1        1        1  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Operating Income

     (27     (19     (4     22        41        65  

Unlevered Free Cash Flow(2)

     (23     (22     (7     8        20        34  

 

(1)

EBITDA as used in this section entitled “—Certain Unaudited Prospective Financial Information” is defined as operating earnings (after deduction of stock-based compensation) before interest, taxes, depreciation and amortization. EBITDA is a non-GAAP financial performance measure and should not be used as an alternative to net income as an indicator of operating performance.

(2)

Unlevered Free Cash Flow as used in this section entitled “—Certain Unaudited Prospective Financial Information” is defined as after-tax unlevered operating cash flow minus capital expenditures and changes in working capital. 2021E Unlevered Free Cash Flow represents Q2 – Q4 2021E.

 

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Moderate Growth Scenario

The following table presents a summary of the Moderate Growth Scenario for the calendar years ending 2021 through 2026 for Soliton on a standalone basis.

 

     Year Ending December 31,  
     2021E     2022E     2023E     2024E      2025E      2026E  
     ($ in millions, except per share values)  

Revenue

   $ 2     $ 27     $ 63     $ 109      $ 145      $ 195  

Gross Profit

     0       21       51       91        124        168  

Operating Expenses:

              

Research and Development

     8       8       8       8        11        15  

Selling and Marketing

     6       17       33       51        68        92  

General and Administrative

     13       15       19       21        21        23  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

EBITDA

     (26     (20     (8     11        23        39  

Depreciation and Amortization

     1       1       1       1        1        1  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Operating Income

     (27     (21     (9     10        22        37  

Unlevered Free Cash Flow

     (23     (23     (12     0        8        17  

Outperform Scenario

The following table presents a summary of the Outperform Scenario for the calendar years ending 2021 through 2026 for Soliton on a standalone basis.

 

     Year Ending December 31,  
     2021E     2022E     2023E     2024E      2025E      2026E  
     ($ in millions)  

Revenue

   $ 2     $ 32     $ 80     $ 148      $ 221      $ 333  

Gross Profit

     0       25       66       127        193        294  

Operating Expenses:

              

Research and Development

     8       8       8       8        12        19  

Selling and Marketing

     6       19       38       59        88        133  

General and Administrative

     13       15       19       21        24        28  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

EBITDA

     (26     (16     3       38        68        114  

Depreciation and Amortization

     1       1       1       1        1        1  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

    

 

 

 

Operating Income

     (27     (17     2       37        67        113  

Unlevered Free Cash Flow

     (23     (20     (2     18        36        62  

Probability of Success Adjusted Unlevered Free Cash Flow(1)

     (23     (20     (2     18        35        58  

 

(1)

Assumes a 60% probability of success for the approval and successful commercial launch of future skin laxity and keloid indications.

Interests of Directors and Executive Officers in the Merger

In considering the recommendation of the Board that stockholders vote to approve the merger proposal, stockholders should be aware that Soliton’s directors and executive officers have interests in the merger that may be different from, or in addition to, the interests of stockholders generally and that may present actual or potential conflicts of interest. The members of the Board were aware of and considered these interests in reaching the determination to adopt, authorize and approve the merger agreement and recommend that the Soliton stockholders vote their shares of common stock to adopt the merger agreement. No additional shares of common stock were granted to any executive officers or non-employee directors in contemplation of the merger.

 

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Treatment of Equity and Equity-Based Awards; Treatment of Warrants

Options. Immediately prior to the effective time of the merger, each option to purchase shares of Soliton common stock, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time of the merger will be cancelled, extinguished and of no further force or effect and automatically converted into the right to receive, as the sole consideration for each share of Soliton common stock underlying such option, an amount in cash, without interest and subject to any applicable withholding tax, equal to the excess of (i) the merger consideration over (ii) the per share exercise price that would be due in cash upon exercise of such option.

The following table sets forth, based on options outstanding as of the date of this proxy statement, the cash proceeds that our non-employee directors and executive officers would receive at the effective time of the merger in respect of the settlement of their options.

 

    

Name

   Number of
Options(1)

(#)
     Total Option
Consideration(2)
($)
 

Non-Employee Directors:

  

Jonathan P. Foster

     60,000        890,100  
  

Danika Harrison

     60,000        890,100  
  

Niquette Hunt

     30,000        410,400  
  

Michael Kaminer, M.D.

     45,000        748,350  

Executive Officers:

  

Walter V. Klemp*

     1,046,950        19,584,229  
  

Bradley Hauser*

     410,000        6,294,100  
  

Christopher Capelli, M.D.*

     1,070,950        20,084,629  
  

Lori Bisson

     403,200        7,081,957  
  

Joe Tanner

     353,200        6,303,564  

 

*

An executive officer who is also a director.

(1)

Assumes an effective time of the merger of September 30, 2021 and, as a result, does not include any additional equity grants that may be made after such date. See “The Merger Agreement—Covenants Regarding Conduct of Business by Soliton Pending the Effective Time” beginning on page 70 for more information concerning the restrictions on Soliton’s ability to make additional equity grants prior to closing.

(2)

Amounts do not reflect withholding of applicable taxes.

Restricted Stock Units. Immediately prior to the effective time of the merger, each restricted stock unit award that is outstanding immediately prior to the effective of the merger, whether vested, unvested or otherwise subject to forfeiture, will be cancelled, extinguished and of no further force or effect and automatically converted into the right to receive, as the sole consideration for each share of Soliton common stock underlying such restricted stock unit award, an amount in cash, without interest and subject to any applicable withholding tax, equal to the merger consideration.

As of the date of this proxy statement, Bradley Hauser, President and Chief Executive Officer of Soliton, is the only executive officer or director who holds outstanding restricted stock units. Mr. Hauser holds 200,000 restricted stock units and, as a result, would receive cash proceeds of $4,520,000 at the effective time of the merger in respect of the settlement of his restricted stock units.

Warrants. At the effective time of the merger, each warrant to purchase shares of Soliton common stock, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time of the merger will be cancelled and automatically converted into the right to receive an amount in cash, without interest and subject to any applicable withholding tax, equal to the excess of (i) the number of shares of Soliton common stock subject to such warrant, multiplied by the merger consideration over (ii) the number of shares of Soliton common stock subject to such warrant, multiplied by the exercise price of such warrant.

 

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The following table sets forth, based on warrants outstanding as of the date of this proxy statement, the cash proceeds that our non-employee directors and executive officers would receive at the effective time of the merger in respect of the settlement of their warrants.

 

    

Name

   Number of
Warrants(1)

(#)
     Total Warrant
Consideration(2)
($)
 

Non-Employee Directors:

  

Jonathan P. Foster

     12,500        260,625  
  

Danika Harrison

     —          —    
  

Niquette Hunt

     —          —    
  

Michael Kaminer, M.D.

     —          —    

Executive Officers:

  

Walter V. Klemp

     27,917        582,070  
  

Bradley Hauser

     —          —    
  

Christopher Capelli, M.D.

     27,917        582,070  
  

Lori Bisson

     15,000        312,750  
  

Joe Tanner

     —          —    

 

(1)

Assumes an effect time of the merger of September 30, 2021 and, as a result, does not include any additional equity grants that may be made after such date. See “The Merger Agreement— Covenants Regarding Conduct of Business by Soliton Pending the Effective Time” beginning on page 70 for more information concerning the restrictions on Soliton’s ability to make additional equity grants prior to closing.

(2)

Amounts do not reflect withholding of applicable taxes.

Severance Payments

Each of Soliton’s executive officers is party to an employment agreement with Soliton, pursuant to which the executive officer is entitled to receive severance payments and benefits if his or her employment is terminated by Soliton without “cause” or by the executive officer for “good reason” (as each such term is defined in the applicable employment agreement), with the payments set forth in clause (i) and clause (ii) below subject, in each case, to the executive officer’s execution and non-revocation of a release of claims in favor of Soliton. The severance payments and benefits are comprised of the following:

 

  (i)

a severance payment equal to 12 months of the executive officer’s base salary,

 

  (ii)

the full amount of the target annual bonus (for Mr. Hauser) or a pro rata portion of the target bonus (for Dr. Capelli, Ms. Bisson and Messrs. Klemp and Tanner), in each case, for the year in which such termination occurs, and

 

  (iii)

continued payment by Soliton of the same portion of the executive officer’s medical and dental insurance premiums under COBRA as during active employment for 12 months from the date of such termination or, if earlier, until the date the executive officer is eligible for medical and/or dental insurance benefits form another employer.

In addition, with respect to Mr. Hauser, pursuant to his employment agreement with Soliton, if Mr. Hauser’s employment is terminated by Soliton without “cause” or by Mr. Hauser for “good reason,” in each case, during the period commencing three months prior to a “change in control” (as defined in his employment agreement) and ending 12 months following a change in control, Mr. Hauser will be entitled to the following severance payments and benefits, in lieu of the severance payments and benefits described above:

 

  (i)

a severance payment equal to 18 months of his base salary,

 

  (ii)

an amount equal to 150% of his target annual bonus for the year in which such termination occurs,

 

  (iii)

accelerated vesting of all outstanding, unvested equity awards he holds as of immediately prior to his termination, and

 

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  (iv)

continued payment by Soliton of the same portion of his medical and dental insurance premiums under COBRA as during active employment for 24 months from the date of such termination or, if earlier, until the date he is eligible for medical and/or dental insurance benefits from another employer.

For purposes of the employment agreements of our executive officers,

 

   

“cause” means that the executive officer (i) pleads “guilty” or “no contest” to, or is convicted of, a felony under federal or state law; (ii) engaged in conduct, in the performance of his or her duties, that constitutes gross negligence or willful misconduct, other than as a result of any disability; (iii) engages in substantiated fraud, misappropriation or embezzlement against Soliton; (iv) engages in any willful misconduct that causes material harm to the reputation of Soliton; or (v) materially breaches any term of the employment agreement; however, to the extent any act or claim allegedly giving rise to “cause” may be cured, Soliton is required to provide the executive officer with written notice within 30 days of the first instance of the act or claim allegedly giving rise to “cause” and the executive officer will have 30 days to cure such act or claim; and

 

   

“good reason” will be deemed to exist:

 

  (i)

if the Board, or the board of directors or managers of any successor entity of Soliton, removes the executive officer from his or her position with Soliton;

 

  (ii)

if Soliton requires the executive officer, without his or her consent, to be based at any office located more than 40 miles from Soliton’s Houston, Texas headquarters (or more than 25 miles from the executive officer’s home for Mr. Hauser);

 

  (iii)

if there is a material reduction (a 10% or greater reduction for Mr. Hauser) of the executive officer’s base salary below the amount specified in his or her employment agreement or amendment, other than a general reduction in base salary that affects all similarly situated employees of Soliton;

 

  (iv)

if the executive officer is assigned any duties materially inconsistent with the duties or responsibilities of the executive officer’s position with Soliton or any other action by Soliton that results in a material diminution in the executive officer’s position, authority, duties, or responsibilities, but excluding an isolated, insubstantial, and inadvertent action not taken in bad faith; or

 

  (v)

a material breach by Soliton of the employment agreement, or any other agreement entered into between Soliton and the executive officer.

However, “good reason” will not exist unless the executive officer gives Soliton written notice within 90 days after the occurrence of the event which the executive officer believes constitutes the basis for good reason, and Soliton fails to cure such act or failure to act, if curable, within 30 days after receipt of such notice.

 

   

“change in control” means the occurrence of any of the following: (i) any “person” (as defined in Soliton’s 2018 Stock Plan, and other than Soliton, a trustee or other fiduciary holding securities under an employee benefit plan of Soliton, or a corporation owned directly or indirectly by the shareholders of Soliton in substantially the same proportions as their ownership of shares of common stock of Soliton) is or becomes the beneficial owner, directly or indirectly, of securities of Soliton representing 30% or more of the combined voting power of Soliton’s then outstanding securities entitled to vote generally in the election of directors; (ii) Soliton is party to a merger, consolidation, reorganization or other similar transaction with another corporation or other person unless, following such transaction, more than 50% of the combined voting power of the outstanding securities of the surviving, resulting or acquiring corporation or person or its parent entity entitled to vote generally in the election of directors (or persons performing similar functions) is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of Soliton’s outstanding securities entitled to vote generally in the election of directors immediately prior to such

 

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transaction, in substantially the same proportions as their ownership, immediately prior to such transaction, of Soliton’s outstanding securities entitled to vote generally in the election of directors; (iii) the election to the Board, without the recommendation or approval of two-thirds of the incumbent Board, of the lesser of: (a) three “directors” (as defined in Soliton’s 2018 Stock Plan); or (b) directors constituting a majority of the number of directors of Soliton then in office; or (iv) there is a complete liquidation or dissolution of Soliton, or Soliton sells all or substantially all of its business and/or assets to another corporation or other person unless, following such sale, more than 50% of the combined voting power of the outstanding securities of the acquiring corporation or person or its parent entity entitled to vote generally in the election of directors (or persons performing similar functions) is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners of Soliton’s outstanding securities entitled to vote generally in the election of directors immediately prior to such sale, in substantially the same proportions as their ownership, immediately prior to such sale, of Soliton’s outstanding securities entitled to vote generally in the election of directors. In no event, however, shall a “change in control” be deemed to have occurred, with respect to a participant under Soliton’s 2018 Stock Plan, if that participant is part of a purchasing group which consummates the “change in control” transaction. A participant shall be deemed “part of a purchasing group” for purposes of the preceding sentence if the participant is an equity participant or has agreed to become an equity participant in the purchasing company or group (except for (x) passive ownership of less than 3% of the shares of the purchasing company; or (y) ownership of equity participation in the purchasing company or group which is otherwise not deemed to be significant, as determined prior to the “change in control” by a majority of the disinterested directors).

The employment agreements (other than Mr. Hauser’s employment agreement) contain certain restrictive covenants in favor of Soliton, including, among other things, a non-competition covenant that applies during the term of the executive officer’s employment and for the 12-month period following his or her termination of employment. The employment agreements (including Mr. Hauser’s employment agreement) also contain non-solicitation and non-interference covenants with respect to Soliton’s customers and employees that apply during the term of the executive officer’s employment and for the 12-month period following his or her termination of employment, as well as a non-disclosure of confidential information covenant that extends perpetually.

Mr. Hauser is party to a non-competition and non-solicitation agreement with Soliton that contains certain restrictive covenants in favor of Soliton, including, among other things, a non-competition covenant that applies during the term of his employment and for the 18-month period following the closing date of the merger, and a non-solicitation covenant with respect to Soliton’s customers and employees that applies during the term of his employment and for the 18-month period following the closing date of the merger.

The employment agreements for Ms. Bisson, Dr. Capelli, Mr. Klemp and Mr. Tanner do not require that Soliton make any “gross up” payments to compensate the executive officer for the excise taxes, if any, imposed under Section 4999 of the Code for the receipt of “excess parachute payments” (within the meaning of Section 280G of the Code) in the event of a termination or resignation following a change in control. Mr. Hauser’s employment agreement, as amended, provides that if Mr. Hauser becomes entitled to payments and/or benefits, whether under the employment agreement or otherwise (collectively, the “Total Payments”), that would result in Mr. Hauser being subject to the excise tax imposed by Section 4999 of the Code, he will be entitled to receive a gross-up payment in an amount such that, after he pays all applicable taxes on the gross-up payment (including any excise tax and any associated interest charges or penalties that could be imposed under Section 4999 of the Code), the net gross-up payment will equal the amount of the excise tax and any associated interest charges or penalties imposed by Section 4999 of the Code upon the Total Payments, such that the net amount he retains will equal the net amount of the Total Payments as if the excise tax imposed by Section 4999 of the Code was not applicable to the Total Payments. However, the amount of the gross-up payment to Mr. Hauser will not exceed $250,000 in any case.

 

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Payments to Executive Officers in Connection with the Merger

The following table sets forth the amount that each executive officer would be entitled to receive if his or her employment is terminated by Soliton without “cause” or by the executive officer for “good reason,” in each case, in connection with the consummation of the merger, assuming an effective time of September 30, 2021.

 

Name

   Cash(1)
($)
     Equity(2)
($)
     Perquisites/
Benefits(3)

($)
     Tax
Reimbursement(4)

($)
     Total
($)
 

Walter V. Klemp

     318,750        6,101,849        —          —          6,420,599  

Bradley Hauser

     1,175,625        10,080,375        —          250,000        11,506,000  

Christopher Capelli

     581,250        6,101,849        40,371        —          6,723,470  

Lori Bisson

     501,563        2,296,117        40,371        —          2,838,051  

Joe Tanner

     383,750        1,938,962        12,025        —          1,951,370  

 

*

Amounts do not reflect withholding of applicable taxes.

(1)

The amounts reported in this column for Mr. Klemp, Dr. Capelli, Ms. Bisson and Mr. Tanner include the following payments under their respective employment agreements: (i) cash severance payments in the following amounts: Mr. Klemp, $225,000, Dr. Capelli, $450,000, Ms. Bisson, $375,000 and Mr. Tanner, $290,000, and (ii) pro rata target annual bonus payments in the following amounts: Mr. Klemp, $93,750, Dr. Capelli, $131,250, Ms. Bisson, $126,563 and Mr. Tanner, $93,750.

The amounts reported in this column for Mr. Hauser include the following payments under his employment agreement: (a) a cash severance payment in the amount of $712,500 and (b) a cash payment in the amount of $463,125, which is 150% of his target annual bonus payment for 2021.

 

(2)

The amounts reported in this column consist of (i) the value of the accelerated vesting and settlement of unvested options to purchase shares of Soliton common stock and (ii) the value of the accelerated vesting and settlement of restricted stock units, as described above under “—Treatment of Equity and Equity-Based Awards; Treatment of Warrants.”

After giving effect to the merger as if it had been completed on September 30, 2021, the number and value of unvested, “in-the-money” options to purchase shares of Soliton common stock and unvested restricted stock units held by the executive officers that would be entitled to accelerated vesting are set forth below. The value of each unvested stock option that would be subject to accelerated vesting is calculated as the excess of (a) $22.60 over (b) the exercise price of such option. The value of each restricted stock unit is $22.60.

 

Name

   Number of Unvested
Stock Options

(#)
     Value of Unvested
Stock Options

($)
     Number of
Restricted Stock
Units

(#)
     Value of Unvested
Restricted Stock
Units

($)
 

Walter V. Klemp

     378,800        6,101,849        —          —    

Bradley Hauser

     357,500        5,560,375        200,000        4,520,000  

Christopher Capelli

     378,800        6,101,849        —          —    

Lori Bisson

     160,750        2,296,117        —          —    

Joe Tanner

     133,825        1,938,962        —          —    

 

(3)

The amounts reported in this column represent estimates of the amount of the continued payment by Soliton of the same portion of the executive officer’s medical and dental insurance premiums under COBRA as during active employment for 12 months from the date of termination of employment (or 18 months from the date of termination of employment, in the case of Mr. Hauser). Soliton does not currently pay any portion of the medical or dental insurance premiums for Mr. Hauser or Mr. Klemp.

(4)

The amount reported in this column represents the maximum amount of the gross-up payment for the excise tax imposed on the payments and benefits to Mr. Hauser in connection with the merger by reason of Section 4999 of the Code.

 

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Indemnification and Insurance

Pursuant to the terms of the merger agreement, members of the Board and executive officers of Soliton will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability insurance policies following the merger. For a more detailed description of the provisions of the merger agreement relating to director and officer indemnification, please see the section of this proxy statement entitled “The Merger Agreement—Indemnification” beginning on page 79.

Support Agreements

Concurrently with the execution and delivery of the merger agreement, AbbVie and Merger Sub entered into the Officer Support Agreements with Mr. Klemp and Dr. Capelli, pursuant to which, each of Mr. Klemp and Dr. Capelli has agreed to vote all of his shares of Soliton common stock (i) in favor of the adoption of the merger agreement, (ii) against any takeover proposal from a third party during the term of the merger agreement and (iii) against any other action that is intended or could reasonably be expected to impede or interfere with or materially delay the merger. As of June 9, 2021, Mr. Klemp and Dr. Capelli collectively held voting power over 688,440 shares of Soliton common stock (approximately 3.19% of the outstanding shares of Soliton common stock).

The Officer Support Agreements will terminate upon the earliest of (i) the effective time of the merger, (ii) a change in the Board’s recommendation, (iii) a material modification or amendment of the merger agreement that reduces the consideration payable thereunder, (iv) the termination of the merger agreement in accordance with its terms and (v) the mutual agreement of the parties.

Royalty and Other Payments to Dr. Capelli Related to Soliton’s License Agreement with MD Anderson

As the inventor of the intellectual property Soliton licenses from MD Anderson, Dr. Capelli is entitled to 50% of the license income that Soliton is required to pay to MD Anderson under its license agreement. Under that license agreement, Soliton is obligated to pay a percentage of its net sales based on the RESONIC console in the mid-single digits as an ongoing royalty. Soliton is also obligated to make certain milestone payments to MD Anderson in the low to mid-six digits.

In addition, Dr. Capelli is entitled to 50% of the proceeds from the sale by MD Anderson of up to 75,000 shares of Soliton common stock that were issued to MD Anderson in connection with the license agreement. Based on the merger consideration of $22.60 per share for those shares, Dr. Capelli will receive up to $847,500 as his portion of the merger consideration to be paid for those shares in the merger.

Compensation to the Members of the SAC and Independent Directors

Each of the members of the SAC, Jonathan P. Foster, Danika Harrison and Niquette Hunt, has received since October 2020 (December 2020 for Ms. Hunt) and will continue to receive compensation of $10,000 per month for such director’s service as a member of the SAC. For the period from March 2021 through July 2021, each of the SAC members has received and will continue to receive an additional $10,000 per month in light of the increased commitment required to serve as a member of the SAC during this period. Also for the period from March 2021 through July 2021, each independent director has received an additional $10,000 per month. (The independent directors are the members of the SAC along with Michael K. Kaminer, M.D.). In total, during the period from March through July 2021, the members of the SAC have received or will receive a total of $30,000 per month as compensation for their service on the SAC and as independent directors.

The compensation described above was approved by the Board and was not contingent upon the SAC’s approval of the merger proposal and is not contingent upon completion of the merger and the transactions contemplated thereby. No other meeting fees or other compensation will be paid to the members of the SAC in

 

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connection with their service on the SAC. Soliton’s compensation policy for independent directors includes the grant of a 10-year option to purchase 15,000 shares of Soliton’s common stock on the date of Soliton’s annual meeting to each independent director who is re-elected at the annual meeting. In light of the then-pending negotiations between Soliton and AbbVie regarding the proposed merger, the stock options that were scheduled to be granted to the independent members of the Board at Soliton’s annual meeting on April 15, 2021 were not granted.

No Financing Condition; Financing Cooperation

The merger agreement does not contain any financing-related closing condition, and AbbVie has represented that it will have sufficient funds at closing to fund the payment of the merger consideration and any other payments required in connection with the consummation of the merger. AbbVie has informed Soliton that it expects that funds needed by AbbVie and Merger Sub in connection with the merger will be derived from cash, cash equivalents, and available borrowing capacity under existing credit facilities.

Regulatory Waiting Periods

The merger is subject to the requirements of the HSR Act, which provides that the merger may not be completed until the applicable waiting period under the HSR Act is terminated or expires. On June 2, 2021, Soliton and AbbVie filed the requisite notification and report forms under the HSR Act with the Antitrust Division of the Department of Justice and the Federal Trade Commission. If the parties do not receive either early termination or a request for additional information from the relevant antitrust authority, the waiting period under the HSR Act will expire at 11:59 p.m. on July 2, 2021.

At any time before or after the effective time of the merger, any reviewing antitrust authorities or another person could take action under the antitrust laws as it deems necessary or desirable in the public interest, including without limitation seeking to enjoin the completion of the merger, seeking a rescission or other unwinding of the merger, or permitting completion subject to regulatory concessions or conditions. We cannot assure you that a challenge to the merger will not be made or that, if a challenge is made, it will not succeed.

Delisting and Deregistration of Common Stock

Upon completion of the merger, the Soliton common stock currently listed on NASDAQ will cease to be listed on NASDAQ and will subsequently be deregistered under the Exchange Act.

Litigation Relating to the Merger

On June 9, 2021, Stephen Musanto filed a complaint against Soliton and the members of the Soliton board in the United States District Court for the Southern District of New York, captioned Musanto v. Soliton, Inc., et al., Case No. 1:21-cv-05088. Mr. Musanto alleges that the named directors of Soliton breached their fiduciary duties by approving the merger agreement through a flawed and unfair process and by failing to make complete and accurate disclosures regarding this process and that Soliton aided and abetted the alleged breaches. Mr. Musanto further alleges that the proxy statement omits to disclose certain facts in violation of Section 14 of the Exchange Act. Mr. Musanto seeks to enjoin or rescind the merger and requests his attorneys’ fees and damages in an unspecified amount. Soliton believes these allegations are without merit and intends to defend against them vigorously.

If this complaint is not resolved on a timely basis, it could delay consummation of the merger and result in additional costs to Soliton, including costs associated with the indemnification of directors. Additional plaintiffs may file lawsuits against Soliton and/or its directors and officers in connection with the merger.

 

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THE MERGER AGREEMENT

The following is a summary of the material provisions of the merger agreement, a copy of which is attached as Annex A to this proxy statement and is incorporated into this proxy statement by reference. We urge you to carefully read this entire proxy statement, including the annexes and the other documents to which we have referred you. You should also review the section entitled “Where You Can Find More Information” beginning on page 105.

We have included the merger agreement for your convenience to provide you with information regarding its terms, and we recommend that you read it in its entirety. The merger agreement is a contractual document that establishes and governs the legal relations between Soliton, AbbVie and Merger Sub, and allocates risks between the parties, with respect to the merger.

The representations and warranties of Soliton contained in the merger agreement have been made solely for the benefit of AbbVie and Merger Sub. In addition, such representations and warranties (a) have been made only for purposes of the merger agreement, (b) have been qualified by certain documents filed with, or furnished to, the SEC by Soliton prior to the date of the merger agreement, (c) have been qualified by confidential disclosures made to AbbVie and Merger Sub in connection with the merger agreement, (d) are subject to materiality qualifications contained in the merger agreement that may differ from what investors may view as material, (e) were made only as of the date of the merger agreement or such other date as is specified in the merger agreement and (f) have been included in the merger agreement for the purpose of allocating risk between Soliton, on the one hand, and AbbVie and Merger Sub, on the other hand, rather than establishing matters as facts. Accordingly, the merger agreement is included with this proxy statement only to provide investors with information regarding the terms of the merger agreement and not to provide investors with any other factual information regarding Soliton or its business. Investors should not rely on the representations and warranties or any descriptions thereof as characterization of the actual state of facts or condition of Soliton or AbbVie or their respective subsidiaries or businesses. Moreover, information concerning the subject matter of the representations and warranties may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in Soliton’s public disclosures.

Soliton will provide additional disclosure in its public reports of any material information necessary to provide the Soliton stockholders with a materially complete understanding of the disclosures relating to the merger agreement. The representations and warranties in the merger agreement and the description of them in this proxy statement should not be read alone but instead should be read in conjunction with the other information contained in the reports, statements and filings Soliton publicly files with the SEC. Such information can be found elsewhere in this proxy statement and in the public filings Soliton makes with the SEC, as described in the section entitled “Where You Can Find More Information” beginning on page 105.

The Merger

Subject to the terms and conditions of the merger agreement, at the effective time of the merger, Merger Sub, a wholly owned subsidiary of AbbVie, will be merged with and into Soliton. The separate corporate existence of Merger Sub will cease and Soliton will continue as the surviving corporation. As a result, Soliton will become a subsidiary of AbbVie. Merger Sub was created solely for purposes of the merger and has no material assets or operations of its own.

Closing and Effective Time of the Merger

The closing of the merger will take place at 10:00 a.m. (New York City time) on the third business day following the satisfaction or waiver (to the extent such waiver is permitted by applicable law) of all of the conditions described in the section below entitled “—Conditions to the Merger” beginning on page 81 (other than any condition that by its nature is to be satisfied at the closing of the merger, but subject to satisfaction or waiver of any such condition), unless Soliton and AbbVie agree to another date or time in writing.

 

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The merger will become effective at the time the certificate of merger is filed with the Secretary of State of the State of Delaware, or such later time as is agreed to by Soliton, AbbVie and Merger Sub and specified in the certificate of merger, which is referred to as the “effective time” of the merger.

At the effective time of the merger, the certificate of incorporation of Soliton in effect immediately prior to the effective time of the merger will be amended and restated to be in the form of Exhibit A to the merger agreement and, as so amended and restated, will be the certificate of incorporation of the surviving corporation until thereafter amended in accordance with their terms or by applicable law. The bylaws of the surviving corporation shall be amended and restated as of the effective time to be identical to the bylaws of Merger Sub as in effect immediately prior to the effective time and, as so amended and restated, will be the bylaws of the surviving corporation until thereafter amended in accordance with their terms or by applicable law.

Merger Consideration

The merger agreement provides that, at the effective time of the merger, each share of Soliton common stock issued and outstanding immediately prior to the effective time of the merger (other than shares of Soliton common stock owned by Soliton as treasury stock or owned by AbbVie or Merger Sub and other than shares of Soliton common stock owned by stockholders who are entitled to demand and properly demand appraisal of such shares pursuant to, and who comply with, Section 262 of the DGCL) will be canceled and converted into the right to receive $22.60 in cash, without interest and less any applicable withholding tax. Following the effective time of the merger, each holder of Soliton common stock will cease to have any rights with respect to such Soliton common stock, except for the right to receive the merger consideration therefor, without interest.

Cancellation of Shares

Any shares of Soliton common stock owned by Soliton as treasury stock or owned by AbbVie or Merger Sub will be automatically canceled and cease to exist and will not be entitled to any merger consideration.

Directors and Officers

The directors of Merger Sub immediately prior to the effective time of the merger will, from and after the effective time of the merger, be the directors of the surviving corporation until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation or removal. The officers of Soliton immediately prior to the effective time of the merger will, from and after the effective time of the merger, be the officers of the surviving corporation until their respective successors have been duly appointed and qualified or until their earlier death, resignation or removal.

Treatment of Equity and Equity-Based Awards

Options. Immediately prior to the effective time of the merger, each option to purchase shares of Soliton common stock, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time of the merger will be cancelled, extinguished and of no further force or effect and automatically converted into the right to receive, as the sole consideration for each share of Soliton common stock underlying such option, an amount in cash, without interest and subject to any applicable withholding tax, equal to the excess of (i) the merger consideration over (ii) the per share exercise price that would be due in cash upon exercise of such option.

Restricted Stock Units. Immediately prior to the effective time of the merger, each restricted stock unit award that is outstanding immediately prior to the effective of the merger, whether vested, unvested or otherwise subject to forfeiture, will be cancelled, extinguished and of no further force or effect and automatically converted into the right to receive, as the sole consideration for each share of Soliton common stock underlying such restricted stock unit award, an amount in cash, without interest and subject to any applicable withholding tax, equal to the merger consideration.

 

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Restricted Shares. Immediately prior to the effective time of the merger, each share of Soliton common stock subject to vesting and/or forfeiture conditions that is outstanding immediately prior to the effective time of the merger will automatically vest in full and become free of such restrictions and thereafter will terminate and be converted into the right to receive, as the sole consideration in respect of such terminated restricted share of Soliton common stock, an amount in cash, without interest and subject to any applicable withholding tax, equal to the merger consideration.

Treatment of Warrants

At the effective time of the merger, each warrant to purchase shares of Soliton common stock, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time of the merger will be cancelled and automatically converted into the right to receive an amount in cash, without interest and subject to any applicable withholding tax, equal to the excess of (i) the number of shares of Soliton common stock subject to such warrant, multiplied by the merger consideration over (ii) the number of shares of Soliton common stock subject to such warrant, multiplied by the exercise price of such warrant.

Stockholders Seeking Appraisal

The merger agreement provides that shares of Soliton common stock held by those stockholders who are entitled to demand and properly demand appraisal pursuant to, and who comply in all respects with, Section 262 of the DGCL will not be converted into the right to receive the merger consideration, but will instead be cancelled and represent the right to receive the rights provided under Section 262 of the DGCL. If a stockholder fails to perfect, or otherwise waives, withdraws or loses his, her or its right to appraisal of his, her or its shares of Soliton common stock, such stockholder’s shares will be treated as if they had been converted at the effective time of the merger into, and will represent only the right to receive, the merger consideration, without interest, and the stockholder’s right to appraisal will be extinguished. Soliton must give AbbVie prompt written notice of demands for appraisal, and AbbVie will have the right to participate in (and, after the effective time of the merger, direct) all negotiations and proceedings with respect to such demands. Soliton may not make a payment with respect to a demand for appraisal or settle or offer to settle any such demands without AbbVie’s prior written consent.

The fair value of shares of Soliton common stock as determined in accordance with Section 262 of the DGCL may be more or less than (or the same as) the merger consideration. Stockholders who wish to exercise appraisal rights must precisely follow specific procedures. See “Appraisal Rights” beginning on page 95.

Payment for the Shares

At least ten business days prior to the mailing of the definitive proxy statement relating to the special meeting, AbbVie will designate a bank or trust company reasonably acceptable to Soliton to act as paying agent for the payment of the merger consideration. At or prior to the effective time of the merger, AbbVie will deposit, or will cause to be deposited, with the paying agent funds sufficient to pay the aggregate merger consideration (the “exchange fund”).

Promptly after the effective time of the merger (but no later than three business days after the effective time of the merger), AbbVie and the surviving corporation will cause the paying agent to mail to all record holders of certificates or book-entry shares representing Soliton common stock whose shares were converted into the right to receive the merger consideration, a letter of transmittal and instructions on how to surrender certificates or book-entry shares representing such Soliton common stock in exchange for the merger consideration. Upon (i) in the case of certificates representing Soliton common stock, the surrender of such certificates and delivery of a properly completed letter of transmittal, duly executed and completed in accordance with the instructions thereto (and such other customary documents as may reasonably be required by the paying agent), or (ii) in the case of book entry shares representing Soliton common stock, receipt of an “agent’s message” by the paying agent (or

 

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such other evidence, if any, of transfer as the paying agent may reasonably request), AbbVie and the surviving corporation will cause the paying agent to pay the holder of such certificates or book-entry shares, in exchange therefor, the merger consideration for each share of Soliton common stock formerly represented by such certificate or book-entry share.

At any time following the first anniversary of the closing date of the merger, the surviving corporation will be entitled to require the paying agent to deliver to it any portion of the exchange fund (including any interest received) which has not been disbursed to holders of certificates or book entry shares, and thereafter such holders will be entitled to look only to AbbVie for claims with respect to such merger consideration, pursuant to the terms of the merger agreement. Any amounts that remain unclaimed by such holders when such amounts would otherwise escheat to or become the property of any governmental entity will become, to the extent permitted by applicable law, the property of AbbVie, free and clear of all claims or interest of any person previously entitled thereto. Each certificate or book-entry share representing Soliton common stock that is surrendered will be canceled. You should not send in your Soliton common stock certificates until you receive a letter of transmittal with instructions from the paying agent. Do not send Soliton common stock certificates with your proxy card.

The merger consideration paid upon the surrender of certificates or book-entry shares representing Soliton common stock in accordance with the merger agreement will be deemed to have been paid in full satisfaction of all rights pertaining to the Soliton common stock previously represented by such certificates or book-entry shares. At the effective time of the merger, the stock transfer books of Soliton will be closed, and there will not be any further registration of transfers of any Soliton common stock thereafter on the records of Soliton.

If, during the period between the date of the merger agreement and the effective time of the merger, the outstanding shares of Soliton common stock shall be changed into a different number of shares or different class by reason of any stock split, reverse stock split, stock dividend (including any dividend or other distribution of securities convertible into Soliton common stock), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change, the merger consideration shall be appropriately adjusted to reflect such stock split, reverse stock split, stock dividend (including any dividend or other distribution of securities convertible into Soliton common stock), reorganization, recapitalization, reclassification, combination, exchange of shares or other like change.

If your Soliton common stock certificate has been lost, stolen or destroyed, you will be entitled to obtain payment of the merger consideration by making an affidavit to that effect and, if required by the surviving corporation, posting a bond, in such reasonable amount as AbbVie may direct, as indemnity against any claim that may be made against the surviving corporation with respect to your lost, stolen or destroyed Soliton common stock certificate.

Pursuant to the merger agreement, AbbVie, the surviving corporation, their respective affiliates and the paying agent may deduct and withhold from the amounts payable under the merger agreement any amounts required to be withheld or deducted under applicable federal, state, local or non-U.S. tax laws with respect to the making of such payments.

Representations and Warranties

The merger agreement contains a number of representations and warranties made by Soliton with respect to Soliton, including representations and warranties relating to:

 

   

corporate organization, good standing and similar matters;

 

   

capital structure and equity securities;

 

   

corporate power and authority to execute and deliver the merger agreement and to consummate the transactions contemplated by the merger agreement;

 

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authorization of the merger agreement, the merger and the other transactions contemplated by the merger agreement and enforceability of the merger agreement;

 

   

required governmental filings and consents and absence of violation of applicable laws and orders in connection with the execution, delivery and performance of the merger agreement and the consummation of the merger and the other transactions contemplated by the merger agreement;

 

   

absence of conflicts with, violation or breach of or defaults under organizational documents and certain contracts in connection with the execution, delivery and performance of the merger agreement and the consummation of the merger and the other transactions contemplated by the merger agreement;

 

   

accuracy and sufficiency of reports and financial statements filed with the SEC;

 

   

absence of undisclosed liabilities;

 

   

disclosure controls and procedures and internal controls over financial reporting;

 

   

accuracy of the information in this proxy statement;

 

   

absence of certain changes or events and the conduct of business in the ordinary course of business since December 31, 2020;

 

   

legal proceedings;

 

   

compliance with applicable laws (including anti-corruption laws) and orders;

 

   

permits and other governmental authorizations (and compliance therewith);

 

   

tax matters;

 

   

employee compensation and benefits matters and matters relating to the Employee Retirement Income Securities Act of 1974, as amended;

 

   

labor matters;

 

   

environmental matters and compliance with environmental laws;

 

   

intellectual property;

 

   

data protection and compliance with laws, policies and contractual requirements relating to privacy, data protection or security of personal information;

 

   

computer systems, software and data;

 

   

the inapplicability of takeover statutes and the absence of stockholder rights agreements;

 

   

real property and other tangible property;

 

   

material contracts;

 

   

insurance;

 

   

international trade and anti-corruption laws;

 

   

healthcare regulatory matters;

 

   

the stockholder approval required to adopt the merger agreement (the Stockholder Approval);

 

   

interested party transactions;

 

   

receipt of opinion from Soliton’s financial advisor; and

 

   

brokers’, finder’s and similar fees payable in connection with the merger and the other transactions contemplated by the merger agreement

 

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The merger agreement also contains a number of representations and warranties made jointly by AbbVie and Merger Sub with respect to AbbVie and Merger Sub, including representations and warranties relating to:

 

   

corporate organization, good standing and similar matters;

 

   

corporate power and authority to execute and deliver the merger agreement and to consummate the transactions contemplated by the merger agreement;

 

   

authorization of the merger agreement, the merger and the other transactions contemplated by the merger agreement, and enforceability of the merger agreement;

 

   

absence of conflicts with, violation or breach of or defaults under organizational documents and certain contracts in connection with the execution, delivery and performance of the merger agreement and the consummation of the merger and the other transactions contemplated by the merger agreement;

 

   

required governmental filings and consents and absence of violation of applicable laws and orders in connection with the execution, delivery and performance of the merger agreement and the consummation of the merger and the other transactions contemplated by the merger agreement;

 

   

ownership and operations of Merger Sub since its formation;

 

   

sufficiency of funds to pay the merger consideration;

 

   

brokers’, finder’s and similar fees payable in connection with the merger and the other transactions contemplated by the merger agreement;

 

   

non-reliance on Soliton estimates, projections, forecasts, forward-looking statements and business and strategic plans;

 

   

accuracy of information supplied to Soliton for inclusion or incorporation by reference in this proxy statement;

 

   

legal proceedings; and

 

   

ownership of Soliton common stock.

Significant portions of the representations and warranties of Soliton are qualified as to “materiality” or “material adverse effect” and significant portions of the representations and warranties of AbbVie and Merger Sub are qualified as to “materiality” or a “parent material adverse effect.” Under the merger agreement, a “material adverse effect” with respect to Soliton means any effect, change, event, fact, circumstance, development or occurrence that (i) would prevent or materially impede, interfere with, hinder or delay the consummation by Soliton of the transactions contemplated by the merger agreement or the performance by Soliton in all material respects of its obligations under the merger agreement or (ii) has a material adverse effect on the business, results of operations, assets or financial condition of Soliton, except that no effect, change, event, development or occurrence to the extent resulting from or arising in connection with the following will (alone or in combination) constitute a “material adverse effect” or will be taken into account pursuant to clause (ii) in determining whether a “material adverse effect” has occurred or would reasonably be expected to occur:

 

   

general conditions (or changes therein) in the industry in which Soliton operates;*

 

   

business, economic or political conditions (or changes therein) in the United States or elsewhere in the world;*

 

   

general conditions (or changes therein) in the credit, financial, banking, currency or capital markets in the United States or elsewhere in the world, including changes in interest or exchange rates;*

 

   

changes in law or in GAAP or other accounting standards after the date of the merger agreement;*

 

   

acts of war (whether or not declared), sabotage, armed hostilities, civil disobedience, civil unrest or terrorism (including cyberterrorism), or any escalation or worsening thereof;

 

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volcanoes, tsunamis, pandemics (including the COVID-19 pandemic and its impact on the supply chain of the Soliton products or product candidates), epidemics, disease outbreaks, earthquakes, hurricanes, tornados, floods or other natural disasters;*

 

   

any decline in the market price, or change in trading volume, of the stock of Soliton (but not the underlying cause of such decline or change);

 

   

any failure of Soliton to meet any internal or public projections, forecasts, guidance, estimates, milestones or budgets or internal or published financial or operating predictions of revenue, earnings, cash flow or cash position (but not the underlying cause of such failure);

 

   

the negotiation, execution, announcement or performance of the merger agreement or the announcement, pendency or performance of the transactions contemplated thereby, including the impact thereof on relationships with customers, suppliers, distributors, partners and other third parties with whom Soliton has a relationship and which resulted directly and solely from the announcement of the merger agreement or the pendency of the merger agreement, or any stockholder litigation (whether direct or derivative) in respect of the merger agreement or any of the transactions contemplated thereby; or

 

   

any action taken by Soliton at AbbVie’s written request or that is expressly required by the merger agreement, or the failure by Soliton to take any action if that action is prohibited by the merger agreement (and AbbVie has declined to consent to that action);

except that, in the case of the five bullet points marked with an asterisk above, such effect, change, event, fact circumstance, development or occurrence may be taken into account in determining whether there has been, or would reasonably expected to be, a “material adverse effect” to the extent it has a disproportionate adverse effect on the business, results of operations, assets or financial condition of Soliton as compared to other similarly situated companies in the industry in which Soliton operates, in which case the incremental disproportionate impact or impacts may be taken into account in determining whether there has been, or would reasonably be expected to be, a “material adverse effect.”

Under the merger agreement, a “parent material adverse effect” with respect to AbbVie or Merger Sub means any effect, change, event, fact, circumstance, development or occurrence that, individually or in the aggregate, would reasonably prevent or materially impede, interfere with, hinder or delay the consummation by AbbVie or Merger Sub of any of the transactions contemplated by the merger agreement.

The representations and warranties of Soliton, AbbVie and Merger Sub will expire upon the effective time of the merger.

Covenants Regarding Conduct of Business by Soliton Pending the Effective Time

Except as required by applicable law, judgment, or governmental authority, as expressly required or expressly permitted by the merger agreement, or as set forth in the disclosure letter, unless AbbVie otherwise consents in writing (which consent may not be unreasonably withheld, conditioned or delayed), Soliton has agreed that during the period from the date of the merger agreement until the effective time of the merger, Soliton will use its commercially reasonable efforts to:

 

   

carry on its business in all material respects in the ordinary course of business;

 

   

preserve its business organizations substantially intact; and

 

   

preserve existing relations with employees, customers, suppliers, licensors, licensees, governmental authorities and other persons with whom Soliton has material business relationships.

In addition, the merger agreement places specific restrictions on the ability of Soliton, unless AbbVie otherwise consents in writing (which consent may not be unreasonably withheld, conditioned or delayed), or

 

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unless otherwise required by applicable law, expressly required or expressly permitted by the merger agreement or set forth in the disclosure letter, among other things, to:

 

   

issue, sell, pledge, dispose of, encumber or grant any shares of Soliton capital stock or other equity or voting interests, or any securities or rights convertible into, exchangeable or exercisable for, or evidencing the right to subscribe for any shares of its capital stock or other equity or voting interests, or any rights, warrants or options to purchase any shares of its capital stock or other equity or voting interests, except pursuant to outstanding options or warrants;

 

   

take any action to cause to be vested and exercisable or vested and no longer subject to forfeiture any otherwise unexercisable option or any otherwise unvested or otherwise subject to forfeiture restricted stock unit, except as required by the express terms of any such option or restricted stock unit that is outstanding;

 

   

redeem, purchase or otherwise acquire any of Soliton’s capital stock or other equity or voting interests or any rights, warrants or options to acquire any shares of its capital stock or other equity or voting interests, except pursuant to the cashless exercise of outstanding options or warrants or the forfeiture or withholding of taxes with respect to outstanding option or restricted stock units;

 

   

declare, set aside for payment, authorize or pay any dividend or make any other distribution in respect of shares of its capital stock or other equity or voting interests;

 

   

split, combine, subdivide or reclassify any shares of its capital stock or other equity or voting interests;

 

   

incur, assume or otherwise become liable for any indebtedness, issue or sell any debt securities or warrants or other rights to acquire any debt securities of Soliton, guarantee any such indebtedness or any debt securities of another person or enter into any “keep well” or other agreement to maintain any financial statement condition of another person, except for indebtedness not to exceed $250,000 in the aggregate;

 

   

enter into any swap or hedging transaction or other derivative agreements, except in the ordinary course of business;

 

   

make any loans, capital contributions or advances to any person;

 

   

sell, assign, license, transfer, lease or mortgage or otherwise encumber or subject to any lien (other than permitted liens) any of its properties or assets (other than intellectual property) that have a current value in excess of $100,000, except dispositions of inventory in the ordinary course and dispositions of obsolete, surplus or worn out assets or assets that are no longer used or useful in the conduct of the business of Soliton in the ordinary course;

 

   

make or authorize capital expenditures for property, plant and equipment, except for the capital expenditures expressly contemplated by Soliton’s budget that was previously made available to AbbVie, or other capital expenditures in an aggregate amount not to exceed $250,000;

 

   

make any acquisition of the capital stock or a material portion of the assets of any other person (other than any acquisition of supplies, raw materials, inventory or products in the ordinary course of business), or any capital contributions or investments (including through any loans or advances) in any other person;

 

   

make any material changes in financial accounting methods, principles or practices materially affecting the consolidated assets, liability or results of operations of Soliton, except as required by GAAP, applicable law or any governmental authority;

 

   

except as required pursuant to the terms of any existing benefit or compensation plan, policy, program, contract, agreement or arrangement (as in effect on the date of the merger agreement),

 

  (a)

increase or decrease the level of base compensation, wages, bonuses, incentive compensation, pension, severance or termination pay or any other compensation or benefits, payable or to

 

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  become payable to any current or former director, officer, employee or independent contractor of Soliton,

 

  (b)

establish, adopt, enter into, terminate or materially amend any benefit or compensation plan, policy, program, contract, agreement or arrangement,

 

  (c)

take any action to accelerate any rights or benefits under any benefit or compensation plan, policy, program, contract, agreement or arrangement, including any action to accelerate the vesting or funding or payment of any compensation or benefit to any current or former director, officer, employee or independent contractor of Soliton,

 

  (d)

hire or engage any employee or independent contractor to be employed or engaged by Soliton with target annual compensation of $100,000 or more or terminate (other than for cause), or furlough, or temporarily layoff any employee or independent contractor with target annual compensation of $100,000,

 

  (e)

pay to any current or former director, officer, employee or independent contractor of Soliton any compensation or benefit (including any retention or transaction bonus) not required under any existing benefit or compensation plan, policy, program, contract, agreement or arrangement (as in effect on the date of the merger agreement),

 

  (f)

promote, demote, change the employee grade or title of or otherwise materially alter the role of any director, officer, employee or independent contractor of Soliton with target annual compensation of $100,000 or more (even if any such action does not affect the individual’s compensation or benefits),

 

  (g)

implement or announce any closings, employment losses, layoffs, reductions in force, furloughs, temporary layoffs, salary or wage reductions, work schedule changes or other such actions that could implicate the Worker Adjustment and Retraining Notification Act of 1988 or any similar laws, or

 

  (h)

unless required by law, (1) modify, extend, or enter into any collective bargaining agreement, or (2) recognize or certify any labor union, works council, or other labor organization, or group of employees of Soliton as the bargaining representative of any employees of Soliton;

 

   

waive or release any noncompetition, nonsolicitation, nondisclosure, noninterference, nondisparagement, or other restrictive covenant obligation of any current or former employee or independent contractor;

 

   

amend Soliton’s organizational documents;

 

   

settle, or offer or propose to settle, any action made or pending against Soliton, other than the settlement of any action in the ordinary course of business that requires payments by Soliton in an amount not to exceed $50,000 individually or $250,000 in the aggregate; provided that no settlement may involve injunctive or equitable relief, impose any restrictions or changes on the business or operations of Soliton, involve any admission of any wrongdoing by Soliton, or involve any license, cross license or similar arrangement with respect to intellectual property, or settle or propose to settle any stockholder litigation against Soliton or its directors relating to the merger agreement or the transactions contemplated thereby;

 

   

make, change or revoke any material tax election, change any annual tax accounting period, change any method of tax accounting, file any amended tax return, consent to any extension or waiver of the limitation period applicable to any tax claim or assessment, enter into any tax allocation, indemnity or sharing agreement, enter into any closing agreement with respect to taxes, settle or surrender any material tax claim, audit or assessment, settle or surrender any right to any material refund, credit, offset or other reduction in taxes, prepare or file any material tax return in a manner inconsistent with past practice or effect any extraordinary intercompany, intracompany or branch transactions outside the

 

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ordinary course of business that are inconsistent with past custom and practice and that could result in tax liability to Soliton in the post-closing tax period in excess of tax liability associated with the conduct of its business in the ordinary course of business and consistent with past practice;

 

   

modify, amend, terminate (other than expiration in accordance with their terms) or waive any rights or claims under any material contract in any material respect, enter into any material contract, or enter into any agreement that contains a change in control or similar provision that would require a material payment to, or give rise to any material rights to, another party or parties in connection with the consummation of the transactions contemplated by the merger agreement or any subsequent change in control of AbbVie or any of its affiliates (including Soliton), or exercise any options under any material contract relating to “co-funding”, “co-commercialization” or similar cost-and-profit participation rights (whether an exercise to “opt in” or “opt out” of such rights) with respect to any product of Soliton to which such material contract relates;

 

   

enter into, fail to renew, amend or terminate in any material respect any agreement under which Soliton leases, subleases, licenses, uses or occupies (whether as landlord, tenant, sublandlord, subtenant or by other occupancy arrangement), or has the right to use or occupy, any real property;

 

   

sell, assign, transfer, convey, license (as licensor), waive rights, fail to maintain or otherwise dispose of any intellectual property, except for non-exclusive licenses of intellectual property granted to customers or distributors of Soliton that are entered into in the ordinary course of business consistent with past practice, fail to diligently prosecute or maintain any Soliton patents or registered intellectual property (or applications therefor) or fail to exercise a right of renewal or extension under any contract relating to any intellectual property, or disclose any trade secrets of Soliton;

 

   

adopt a plan or agreement of complete or partial liquidation or dissolution, merger, consolidation, restructuring or other reorganization of Soliton;

 

   

enter into or amend any interested party transaction; or

 

   

qualify a new site for the manufacture of any product of Soliton, other than in the ordinary course of business consistent with past practice.

No Solicitation of Takeover Proposals

Soliton has agreed to, and has agreed to instruct and use its reasonable best efforts to cause its directors, officers, employees, investment bankers, financial advisors, attorneys, accountants, consultants and other advisors and representatives to immediately cease any solicitation, discussions or negotiations with any person that may have been ongoing with respect to a takeover proposal (as defined below), cease providing any information with respect to Soliton to any such person and request the destruction or return to Soliton of any confidential information concerning Soliton in any such person’s possession or control. Subject to certain exceptions described below and in “The Merger Agreement—Change in Board Recommendation,” Soliton has also agreed that it will not, and it will instruct, and use its reasonable best efforts to cause its directors, officers, employees, investment bankers, financial advisors, attorneys, accountants, consultants or other advisors or representatives not to, directly or indirectly:

 

   

initiate, solicit or knowingly encourage (including by way of furnishing non-public information) the submission of any inquiries regarding, or the making of any proposal or offer that constitutes, or would reasonably be expected to lead to, a takeover proposal;

 

   

engage in, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any other person (other than the parties to the merger agreement or their representatives) any non-public information in connection with, or for the purpose of, encouraging any inquiry, proposal or offer that constitutes, or would reasonably be expected to lead to, a takeover proposal;

 

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execute or enter into any letter of intent, memorandum of understanding, agreement in principle, license agreement, merger agreement, acquisition agreement or similar agreement providing for a takeover proposal (any such agreement is referred to herein as a “company acquisition agreement”); or

 

   

resolve, propose or agree to do any of the foregoing.

The merger agreement provides that, notwithstanding the restrictions described above, if, at any time prior to the Stockholder Approval, Soliton receives an unsolicited bona fide takeover proposal that did not result from a material breach of the restrictions described above, Soliton and its representatives may contact and engage in discussions with the person making such takeover proposal (or its representatives) solely to clarify the terms and conditions thereof or, if such takeover proposal is made orally, to request that such takeover proposal be made in writing. If the Board or any committee thereof determines in good faith, after consultation with its financial advisors and outside legal counsel, that any such takeover proposal constitutes or would reasonably be expected to result in a superior proposal (as defined below), and the failure to take such actions would be inconsistent with the directors’ fiduciary duties under applicable law, then Soliton and any of its representatives may:

 

   

enter into a confidentiality agreement with the person making the takeover proposal, provided that such confidentiality agreement contains provisions that are not materially less favorable in the aggregate to Soliton than those contained in the existing confidentiality agreement between Soliton and AbbVie;

 

   

furnish to the person making the takeover proposal (and its representatives), pursuant to a confidentiality agreement that meets the requirements described in the bullet point above, information, including non-public information, with respect to Soliton (provided that Soliton delivers to AbbVie all such nonpublic information within 24 hours of its delivery to the person making the takeover proposal); and

 

   

following the execution of a confidentiality agreement that meets the requirements described in the first bullet point above, engage in or otherwise participate in discussions or negotiations regarding the takeover proposal with the person making the taking over proposal (and its representatives and financing sources).

Soliton has agreed to promptly (and in any event within 48 hours after knowledge of receipt by an officer or director of Soliton) notify AbbVie if Soliton or its representatives receive any inquiry, proposal or offer that constitutes, or would reasonably be expected to lead to, a takeover proposal. Soliton has also agreed to disclose to AbbVie the material terms and conditions of such inquiry, proposal or offer and the identity of the person making such inquiry, proposal or offer, and to provide AbbVie a copy of such proposal or offer and copies of any documents evidencing or delivered in connection with such takeover proposal. Further, Soliton will keep AbbVie informed promptly (and in any event within 24 hours after knowledge of the applicable developments by an officer or director of Soliton of any material developments with respect to any such takeover proposal).

A “takeover proposal” means any inquiry, proposal or offer from any person or group of persons (other than AbbVie and its subsidiaries) relating to, in a single transaction or a series of related transactions, any direct or indirect:

 

  (i)

acquisition or exclusive license of 20% or more of the consolidated assets of Soliton,

 

  (ii)

issuance or acquisition of 20% or more of the outstanding Soliton common stock,

 

  (iii)

tender offer or exchange offer that if consummated would result in any person or group of persons beneficially owning 20% or more of the outstanding Soliton common stock or

 

  (iv)

merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or similar transaction involving Soliton pursuant to which such person or group of persons (or the stockholders of any person) would acquire, directly or indirectly, 20% or more of the consolidated assets of Soliton, 20% or more of the outstanding capital stock of Soliton or 20% or more of the aggregate voting power of Soliton or of the surviving entity in a merger, consolidation, share exchange or other business combination involving Soliton or the resulting direct or indirect parent of Soliton or such surviving entity.

 

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However, the merger agreement and the transactions contemplated thereby do not constitute a “takeover proposal.”

A “superior proposal” means a bona fide written takeover proposal of the types described in clauses (i) through (iv) of the definition of “takeover proposal” above (with all references to “20%” in the definition of takeover proposal being deemed to be references to “80%”), which the Board or any committee thereof determines in its good faith judgment (a) would be more favorable to Soliton’s stockholders from a financial point of view than the transactions contemplated by the merger agreement and (b) is reasonably capable of being completed on the terms proposed, in each case, taking into account all legal, regulatory, financial, financing and other aspects of such proposal and of the merger agreement that the Board or such committee thereof may deem appropriate.

Change in Board Recommendation

The merger agreement provides that, except as described below, neither the Board nor any committee thereof will:

 

   

withhold, withdraw or qualify (or modify in a manner adverse to AbbVie), or publicly propose to withhold, withdraw or qualify (or to modify in a manner adverse to AbbVie), the recommendation of the Board that the holders of Soliton common stock adopt the merger agreement, or fail to include such recommendation in this proxy statement;

 

   

fail to publicly reaffirm such recommendation, or fail to recommend against any takeover proposal, upon the written request of AbbVie;

 

   

in the case of any takeover proposal structured as a tender or exchange offer, fail to recommend against acceptance of such tender or exchange offer by Soliton’s stockholders within 10 business days of the commencement of such tender or exchange offer pursuant to Rule 14-d-2 of the Exchange Act; or

 

   

recommend the approval or adoption of, or approve or adopt, or publicly propose to recommend, approve or adopt, any takeover proposal.

Each of the actions described in the preceding four bullet points is referred to herein as an “adverse recommendation change.”

The merger agreement further provides that, except as described below, neither the Board nor any committee thereof will authorize, execute or enter into, or cause or permit Soliton to execute or enter into, any company acquisition agreement.

Notwithstanding the restrictions described above, prior to the Stockholder Approval, the Board or any committee thereof may make an adverse recommendation change (i) in response to an intervening event (as defined below), if the Board or any committee thereof has determined in good faith, after consultation with its financial advisors and legal counsel, that such adverse recommendation change is made in response to an intervening event (and not in response to a takeover proposal) and that failure to take such action would be inconsistent with the Board’s fiduciary duties under applicable law, or (ii) in response to a takeover proposal, if the Board or any committee thereof has determined in good faith, after consultation with its financial advisors and legal counsel, that such takeover proposal constitutes a superior proposal. In addition, if, as described in clause (ii) of the preceding sentence, the Board or any committee thereof determines in good faith, after consultation with its financial advisors and legal counsel, that a takeover proposal constitutes a superior proposal, then, prior to the Stockholder Approval, the Board may cause Soliton to enter into a company acquisition agreement with respect to such superior proposal and terminate the merger agreement, subject to the concurrent payment by Soliton of a termination fee (as described below under “The Merger Agreement—Soliton Termination Fee”) and subject to such superior proposal not resulting from a material breach of the sections of the merger agreement pertaining to takeover proposals (as described here and above under “The Merger Agreement—No Solicitation of Takeover Proposals”).

 

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The actions described in the previous paragraph (including any adverse recommendation change, entry into a company acquisition agreement or termination of the merger agreement as described therein) may be taken only if:

 

   

Soliton has first given AbbVie at least three business days’ prior written notice advising AbbVie that the Board or a committee thereof intends to take such action;

 

   

Soliton has negotiated, and caused its representatives to negotiate, in good faith with AbbVie during such three business day notice period, to the extent AbbVie requests to negotiate, to enable AbbVie to propose an offer to revise the terms of the merger agreement such that (i) if such intended action is in connection with a superior proposal, it would cause such superior proposal to no longer constitute a superior proposal, or (ii) if such intended action is in connection with an intervening event, it would eliminate the need of the Board to effect such action in connection with such intervening event;

 

   

following the end of such three business day notice period, the Board or any committee thereof shall have considered in good faith such offer proposed by AbbVie, and shall have determined in good faith after consultation with its financial advisors and outside counsel that (i) if such intended action is in connection with a superior proposal, the superior proposal would nevertheless continue to constitute a superior proposal if the revisions proposed in AbbVie’s offer were to be given effect, or (ii) if such intended action is in connection with an intervening event, the failure to effect such action would continue to be inconsistent with the directors’ fiduciary duties under applicable law; and

 

   

solely in the case of actions to be taken in connection a superior proposal, in the event of any change to any of the financial terms or any other material terms of such superior proposal, Soliton has given AbbVie an additional two business days’ prior written notice of the type described in the first bullet point above, and, following delivery of such notice, Soliton has complied with the requirements set forth in the second and third bullet points above (with each reference in such bullet points to a “three business day notice period” instead being a reference to such two business day notice period).

An “intervening event” means any state of fact, event, development, change in circumstance or occurrence, or combination thereof, arising or occurring after the date of the merger agreement that materially affects Soliton and was either not known to or not reasonably foreseeable by the Board as of or prior to the date of the merger agreement (or, if known to or reasonably foreseeable by the Board, the consequences of which were neither known to nor reasonably foreseeable by the Board as of or prior to the date of the merger agreement). None of the following, however, will constitute an “intervening event”: (i) the receipt, existence or terms of a takeover proposal, (ii) any events, developments or change in circumstances of AbbVie, (iii) clearance of the merger under the HSR Act, or (iv) the fact, in each case in and of itself, that Soliton meets or exceeds any internal or published projections, forecasts or estimates of its revenue, earnings or other financial performance or results of operations for any period ending on or after the date of the merger agreement, or any change in and of itself after the date of the merger agreement in the market price or trading volume of Soliton common stock or the credit rating of Soliton (but any underlying cause of any of the foregoing may constitute an “intervening event”).

Nothing described above (or under “The Merger Agreement—No Solicitation of Takeover Proposals”) prohibits Soliton, the Board or any committee thereof from (i) if any takeover proposal structured as a tender or exchange offer is commenced, taking or disclosing to Soliton’s stockholders a position contemplated by Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of Regulation M-A promulgated under the Exchange Act, or (ii) making any other disclosure to Soliton’s stockholders that is required by applicable law or if the Board determines, in good faith after consultation with outside legal counsel, that the failure of the Board to make such disclosure would be inconsistent with the Board’s fiduciary duties under applicable law. Any such disclosure or statement that constitutes or contains an adverse recommendation change, however, will be subject to the terms of the merger agreement, including the requirements with respect to adverse recommendation changes described above.

 

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Reasonable Best Efforts and Certain Pre-Closing Obligations

Soliton and AbbVie have agreed to use reasonable best efforts to promptly:

 

   

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 the closing the merger to be satisfied as promptly as reasonably practicable and to consummate and make effective, in the most expeditious manner reasonably practicable, the transactions contemplated by the merger agreement, including preparing and filing promptly all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents;

 

   

obtain all approvals, consents, registrations, waivers, permits, authorizations, orders and other confirmations from any governmental authority or third party necessary, proper or advisable to consummate the transactions contemplated by the merger agreement; and

 

   

execute and deliver any additional instruments necessary to consummate the transactions contemplated by the merger agreement;

in each case, other than with respect to antitrust laws, which are discussed below. Neither AbbVie nor Soliton, however, is required to (and, without the consent of AbbVie, Soliton may not) pay any consent or similar fee, “profit-sharing” or other similar payment or other consideration in any form (including increased rent or any other similar payment or commercial accommodation), or provide additional security or otherwise assume or incur or agree to assume or incur any liability, to obtain any consent of any person (other than a governmental authority) under any contract.

Soliton and AbbVie have each also agreed to:

 

   

take all action necessary to ensure that no takeover law is or becomes applicable to any of the transactions contemplated by the merger agreement and refrain from taking any actions that would cause the applicability of such laws;

 

   

if the restrictions of any takeover law become applicable to any of the transactions contemplated by the merger agreement, take all action reasonably necessary to ensure that the transactions may be consummated as promptly as practicable on the terms contemplated by the merger agreement and otherwise lawfully minimize the effect of such takeover law on the transactions;

 

   

make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated by the merger agreement as soon as practicable and advisable after the date of the merger agreement;

 

   

supply as promptly as reasonably practicable any additional information and documentary material that may be requested pursuant to the HSR Act; and

 

   

use reasonable best efforts to avoid or eliminate each and every impediment and obtain all consents under any antitrust laws that may be required by any foreign or U.S. federal, state or local governmental authority, so as to enable Soliton and AbbVie to consummate the transactions contemplated by the merger agreement prior to November 8, 2021 (the outside date).

Notwithstanding the above, neither AbbVie nor its affiliates will be required to (and Soliton is not permitted, without the express written consent of AbbVie, to agree to):

 

  (i)

offer, agree or consent to sell, divest, lease, license, transfer, dispose of or otherwise encumber or hold separate (before or after the closing of the merger) any assets, licenses, operations, rights, product lines, businesses or interest therein of AbbVie or Soliton or any of their respective affiliates;

 

  (ii)

offer, agree or consent to any changes (including through a licensing arrangement) to or restriction on (including any access or other requirements), or other impairment of AbbVie’s ability to own or

 

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  operate, any such assets, licenses, operations, rights, product lines, businesses or interests or AbbVie’s ability to vote, transfer, receive dividends or otherwise exercise full ownership rights with respect to the equity securities or other ownership interests of Soliton;

 

  (iii)

contest, defend or appeal any action brought by a governmental authority against such party which seeks to prohibit, prevent or restrict the transactions contemplated by the merger agreement; or

 

  (iv)

commit to or effect any action that is not conditioned upon consummation of the merger. In addition, Soliton is not permitted to, without the express written consent of AbbVie, take or agree to take any action relating to any objections asserted by any governmental authority with respect to the transactions contemplated by the merger agreement under any antitrust laws with respect to Soliton’s business or operations.

The merger agreement provides that AbbVie will control (i) the strategy for obtaining any approvals, consents, registrations, waivers, permits, authorizations, orders and other confirmations from any governmental authority in connection with the transactions contemplated by the merger agreement, and (ii) the overall development of the positions to be taken, and the regulatory actions to be requested, in any filing or submission with a governmental authority in connection with the transactions contemplated by the merger agreement and in connection with any investigation or other inquiry or litigation by or before, or any negotiations with, a governmental authority relating to the transactions, as well as the overall development of all other regulatory matters incidental thereto. AbbVie will, however, consult and cooperate with Soliton with respect to such strategy, positions and requested regulatory action and consider Soliton’s views in good faith. Soliton and AbbVie have agreed to use reasonable best efforts to cooperate in all respects with each other in connection with any filing or submission with a governmental authority in connection with the transactions contemplated by the merger agreement and in connection with any investigation or other inquiry by or before a governmental authority relating to such transactions, including any proceeding initiated by a private person. To the extent reasonably practicable, all telephone calls and meetings with a governmental authority regarding the transactions contemplated by the merger agreement must include representatives of AbbVie and Soliton, and each party must inform the other of any material communications with a governmental authority relating to any antitrust laws. In addition, except as otherwise restricted by the merger agreement, AbbVie and Soliton (or their outside counsel) will have the right to review in advance all written materials submitted or communications made to any governmental authority in connection with the transactions contemplated by the merger agreement, in each case to the extent such materials or communications are related to any antitrust laws.

Access to Information; Confidentiality

Subject to applicable law, preservation of legal privileges, protection of trade secrets and competitively sensitive information, COVID-19 safety measures, and any applicable judgment, contract or confidentiality obligation, we have agreed to provide AbbVie and its representatives, from time to time prior to the earlier of the effective time of the merger or the termination of the merger agreement, (i) reasonable access during normal business hours to our officers, employees, agents, properties, books, contracts and records and (ii) such information as AbbVie may reasonably request regarding our business, personnel, assets, liabilities and properties. All information so provided will be subject to the confidentiality agreement between Soliton and AbbVie.

Meeting of Our Stockholders

We have agreed to take all action in accordance with applicable law, Soliton’s organizational documents and the rules of the NASDAQ to establish a record date for, duly call, give notice of, convene and hold a meeting of holders of Soliton common stock for the purpose of considering and taking action upon the adoption of the merger agreement, which meeting is the subject of this proxy statement, as soon as reasonably practicable, and in any event to use reasonable best efforts to hold such meeting no later than 45 days after the earlier of (i) the tenth calendar day after this proxy statement has been filed with the SEC if by such date the SEC has not informed

 

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Soliton that it intends to review this proxy statement and (ii) if the SEC has by such date informed Soliton that it intends to review this proxy statement, the date on which the SEC confirms that it has no further comments on this proxy statement.

The merger agreement permits us to adjourn, recess, or postpone such meeting:

 

   

to the extent required by applicable law;

 

   

if as of the time for which such meeting is originally scheduled, (i) we have not received proxies representing a sufficient number of shares of Soliton common stock to adopt the merger agreement, or (ii) there are insufficient shares of Soliton common stock represented (either in person or by proxy) and voting to constitute a quorum necessary to conduct the business of the meeting; or

 

   

after consultation with AbbVie, to the extent necessary to ensure that any required supplement or amendment to this proxy statement which the Board has determined in good faith after consultation with outside counsel is necessary under applicable law is provided to Soliton stockholders within a reasonable amount of time prior to such meeting.

Such meeting may not be so adjourned, recessed or postposed beyond the date that is 30 calendar days after the date on which such meeting was originally scheduled (or, if earlier, the date that is three business days prior to the outside date) without the prior written consent of AbbVie, except in the case of an adjournment, recess or postponement required by applicable law. Pursuant to the merger agreement, AbbVie may require us, to the extent permitted by law, to adjourn such meeting to a date specified by AbbVie that is more than 30 calendar days after the date on which such meeting was originally scheduled (but not fewer than three business days prior to the outside date) if (i) a quorum is not present at such meeting, or (ii) we have not received proxies representing a sufficient number of shares of Soliton common stock to adopt the merger agreement as of the date of such meeting. However, AbbVie may only require two such adjournments, and no such adjournment may be required to be for a period exceeding ten business days.

Indemnification

Under the merger agreement, from and after the effective time of the merger, each of AbbVie and the surviving corporation will, and AbbVie will cause the surviving corporation to, (i) jointly and severally indemnify and hold harmless each individual who is at the effective time of the merger, or was at any time prior to the effective time of merger, a director or officer of Soliton (“indemnitees”) against any and all claims, liabilities, losses, damages, judgments, fines, penalties, costs (including amounts paid in settlement or compromise) and expenses (including fees and expenses of legal counsel) in connection with any action based on or arising out of (A) the fact that such person is or was a director of officer of Soliton at or prior to the effective time of the merger or (B) acts or omissions by such person in his or her capacity as a director or officer of Soliton or taken at the request of Soliton at or prior to the effective time of the merger, and (ii) assume (in the case of the surviving corporation, in the merger without any further action) all obligations of Soliton to such indemnitees in respect of indemnification, advancement of expenses and exculpation from liabilities for acts or omissions occurring at or prior to the effective time of the merger as provided in Soliton’s organizational documents as in effect on the date of the merger agreement or in any agreement in existence as of the date of the merger agreement providing for indemnification between Soliton and any such person.

AbbVie has agreed to, from and after the effective time of the merger, cause, unless otherwise required by law, the certificate of incorporation and bylaws of the surviving corporation to contain provisions no less favorable to the indemnitees with respect to limitation of liabilities and exculpation of directors and officers and indemnification of and advancement of expenses to directors and officers than the provisions that are in Soliton’s organizational documents as in effect on the date of the merger agreement. AbbVie has further agreed that such provisions will not be amended, repealed or otherwise modified in a manner that would adversely affect the rights of the indemnitees thereunder. In addition, from the effective time of the merger, AbbVie will, and AbbVie

 

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will cause the surviving corporation to, without requiring a preliminary determination of entitlement to indemnification, advance any expenses (including fees and expenses of legal counsel) of any such indemnitee (including in connection with enforcing the indemnity and other obligations referred to in the merger agreement) as incurred to the fullest extent permitted under applicable law; provided that the person to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such indemnitee is not entitled to be indemnified pursuant to the merger agreement.

The merger agreement provides that, for the six-year period commencing immediately after the effective time of the merger, the surviving corporation will maintain in effect Soliton’s current directors’ and officers’ liability insurance covering acts or omissions occurring at or prior to the effective time of the merger with respect to those individuals who are, as of the effective time of the merger, covered by Soliton’s directors’ and officers’ liability insurance policies on terms and scope with respect to such coverage, and in amount, no less favorable to such individuals than those of such policy in effect on the date of the merger agreement (or AbbVie may substitute therefor policies, issued by reputable insurers, of at least the same coverage with respect to matters existing or occurring prior to the effective time of the merger, including a “tail” policy). If in any year the aggregate annual premium of such insurance coverage exceeds 300% of the annual premium currently payable by Soliton with respect to its current directors’ and officers’ liability insurance policy (which we refer to as the “premium cap”), however, then the surviving corporation shall be obligated to obtain a policy for such year with the greatest coverage available for a cost not exceeding the premium cap. Prior to the effective time of the merger, Soliton may purchase a six-year prepaid “tail policy” on terms and conditions providing at least substantially equivalent benefits as the current policies of directors’ and officers’ liability insurance maintained by Soliton with respect to matters existing or occurring prior to the effective time of the merger, covering without limitation the transactions contemplated by the merger agreement, so long as the effective annual premium under such policy does not exceed the premium cap. If such prepaid “tail policy” has been obtained by Soliton, it will be deemed to satisfy all obligations to obtain insurance pursuant to the merger agreement and the surviving corporation will cause such policy to be maintained in full force and effect, for its full term, and honor all of its obligations thereunder.

Employee Benefits Matters

The merger agreement provides that, for a period beginning at the effective time of the merger and ending on the first anniversary of the merger (or, if earlier, upon the termination of the employment of the relevant continuing Soliton employee), AbbVie will, or will cause the surviving corporation to, provide to “continuing Soliton employees” (as defined below) (i) on an individual basis, an annual base salary or base wage rate (as applicable) and a target annual cash bonus opportunity or target cash commissions opportunity that are no less favorable, in the aggregate, than the annual base salary or base wage rate (as applicable) and target annual cash bonus opportunity or target cash commissions opportunity in effect immediately prior to the effective time of the merger under Soliton’s benefit and compensation plans, policies, programs, contracts, agreements and arrangements, (ii) on an individual basis, cash severance benefits that are no less favorable in the aggregate than, and pursuant to the terms of, Soliton’s severance plans in effect on the date of the merger agreement (except that individuals who, as of the date of the merger agreement, are subject to individual employment agreements that provide for severance benefits greater than the severance benefits provided pursuant to Soliton’s severance plans will continue to be subject to and eligible for severance benefits pursuant to such agreements as in effect on the date of the merger agreement), and (iii) on a group basis, employee benefit plans and arrangements (other than base salaries, base wages, bonus opportunities, severance benefits, defined benefit pension benefits, nonqualified deferred compensation, retiree or post-termination health or welfare benefits, equity or equity-based compensation and retention or change in control-related compensation or benefits) that are no less favorable in the aggregate than the employee benefit plans and arrangements (subject to the same exclusions as described above) provided to continuing Soliton employees immediately prior to the effective time of the merger under Soliton’s benefit and compensation plans, policies, programs, contracts, agreements and arrangements, with the determination of the employee benefits under this clause (iii) to be made by AbbVie from time to time, based on

 

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AbbVie’s evaluation of the nature and scope of the continuing Soliton employee’s duties, principal location where those duties are performed, grade level, and performance, among other things.

In addition, with respect to any 401(k) plan of the surviving corporation and any vacation, paid time-off and severance plans in which continuing Soliton employees are eligible to participate after the effective time of the merger, for purposes of eligibility to participate, level of benefits and vesting, and accrual of vacation and paid time-off, each continuing Soliton employee’s service with Soliton will be treated as service with the surviving corporation to the same extent such service was recognized for the same purposes under a similar Soliton plan in which such continuing Soliton employee participated immediately prior to the effective time of the merger. However, such service need not be recognized to the extent that recognition would result in duplication of benefits or compensation for the same period of service, and no continuing Soliton employee will be credited with his or her years of service with Soliton before the effective time of the merger for purposes of benefit accruals under any defined benefit pension plans or any retiree medical or life insurance or other welfare-type benefits, or for any purposes under any equity or equity-based plans, that are maintained by AbbVie and its subsidiaries.

AbbVie has also agreed that it will, or will cause the surviving corporation to, use commercially reasonable efforts to waive, or cause to be waived, any pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods under any group health benefit plan maintained by the surviving corporation in which continuing Soliton employees will be eligible to participate from and after the effective time of the merger (and in the plan year in which the effective time of the merger occurs), except to the extent that such pre-existing condition limitations, exclusions, actively-at-work requirements and waiting periods would not have been satisfied or waived under the comparable Soliton plan immediately prior to the effective time of the merger. Further, AbbVie will, or will cause the surviving corporation to, use commercially reasonable efforts to recognize the dollar amount of all co-payments, deductibles and similar expenses paid by each continuing Soliton employee during the plan year in which the effective time of the merger occurs for purposes of satisfying such year’s deductible and co-payment limitations under the relevant group health benefit plans in which such continuing Soliton employee will be eligible to participate from and after the effective time of the merger (and in the plan year in which the effective time of the merger occurs).

A “continuing Soliton employee” as used herein refers to any employee of Soliton immediately prior to the effective time of the merger who remains so employed immediately after the effective time of the merger.

Additional Agreements

The merger agreement contains additional agreements between us and AbbVie relating to, among other things:

 

   

the preparation, filing and mailing of this proxy statement and efforts to solicit proxies;

 

   

consultations regarding public announcements;

 

   

stockholder litigation;

 

   

notification of certain matters; and

 

   

certain tax matters.

Conditions to the Merger

The obligation of each party to the merger agreement to effect the merger is subject to the satisfaction, or (if permissible under applicable law) waiver by AbbVie and Soliton, on or before the closing date of the merger of the following conditions:

 

   

no judgment enacted, promulgated, issued, entered, amended or enforced by any governmental authority of competent jurisdiction, nor any applicable law (collectively, “restraints”), shall be in effect enjoining, making illegal or otherwise prohibiting the consummation of the merger;

 

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the waiting period (including any extension thereof) applicable to the consummation of the merger under the HSR Act shall have expired or early termination thereof shall have been granted, and no voluntary agreement between AbbVie, Merger Sub or Soliton and any governmental authority not to consummate the merger shall be in effect; and

 

   

the adoption of the merger agreement by the holders of a majority of the outstanding shares of Soliton common stock entitled to vote thereon (the Stockholder Approval).

The obligation of AbbVie and Merger Sub to effect the merger is subject to the satisfaction, or (if permissible under applicable law) waiver by AbbVie, on or prior to the closing date of the merger of the following additional conditions:

 

   

accuracy as of the date of the merger agreement and as of the closing date of the merger (or as otherwise specified) of the representations and warranties made by Soliton to the extent specified in the merger agreement;

 

   

performance in all material respects of, or compliance in all material respects with, obligations of Soliton contained in the merger agreement to be performed or complied with by Soliton prior to the closing of the merger;

 

   

since the date of the merger agreement, there shall have been no effect, change, event, development or occurrence that, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect that is continuing as of the closing date of the merger;

 

   

delivery to AbbVie of a certificate signed by an executive officer of Soliton certifying to the satisfaction of the three conditions above-mentioned; and

 

   

there shall be no action pending that has been instituted by a governmental authority of competent jurisdiction seeking any judgment to (i) prevent, prohibit or make illegal the consummation of the merger; or (ii) prohibit or materially limit AbbVie’s ability to own, control, direct, manage, or operate Soliton.

The obligation of Soliton to effect the merger is subject to the satisfaction, or (if permissible under applicable law) waiver by Soliton, on or prior to the closing date of the merger of the following additional conditions:

 

   

accuracy as of the date of the merger agreement and as of the closing date of the merger (or as otherwise specified) of the representations and warranties made by AbbVie and Merger Sub to the extent specified in the merger agreement;

 

   

performance in all material respects of, or compliance in all material respects with, obligations of each of AbbVie and Merger Sub contained in the merger agreement to be performed or complied with by AbbVie or Merger Sub prior to the closing of the merger; and

 

   

delivery to Soliton of a certificate signed by an executive officer of AbbVie certifying to the satisfaction of the two conditions above-mentioned.

None of the parties may rely on the failure of any of the conditions to the merger to be satisfied if such failure was principally caused by the failure of such party to perform in all material respects its obligations under the merger agreement.

Soliton and AbbVie can provide no assurance that all of the conditions precedent to the merger will be satisfied or waived by the party permitted to do so.

Financing of the Merger

The merger agreement does not contain any financing-related conditions to the closing of the merger, and AbbVie has represented that it has sufficient cash and cash equivalents, together with available borrowing

 

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capacity under existing credit facilities, to pay the merger consideration and any other amounts required to be paid in connection with the consummation of the merger. AbbVie has informed Soliton that it expects that funds needed by AbbVie and Merger Sub in connection with the merger will be derived from cash and cash equivalents on hand and borrowings under existing credit facilities.

Termination of the Merger Agreement

Soliton and AbbVie may mutually agree in writing, at any time prior to the effective time of the merger, to terminate the merger agreement and abandon the merger. In addition, either AbbVie or Soliton may terminate the merger agreement and abandon the merger without the consent of the other, at any time prior to the effective time of the merger if:

 

   

the merger is not consummated by the outside date (November 8, 2021), provided that:

 

   

AbbVie will have the right to extend the outside date to February 8, 2022, if, on November 8, 2021, all conditions to the closing of the merger either have been satisfied or waived or are then capable of being satisfied, except for one or more of the conditions relating to the waiting period under the HSR Act, the absence of restraints (where the relevant restraint arises under antitrust laws), or the absence of pending actions (where the relevant action arises under antitrust laws), and

 

   

AbbVie will have the right to further extend the outside date to May 8, 2022, if, on February 8, 2022, all conditions to the closing of the merger either have been satisfied or waived or are then capable of being satisfied, except for the conditions relating to the waiting period under the HSR Act, the absence of restraints (where the relevant restraint arises under antitrust laws), or the absence of pending actions (where the relevant action arises under antitrust laws);

provided further that a party will not be able to so terminate the merger agreement, however, if such party’s breach of its representations and warranties or failure to perform any of its obligations under the merger agreement has been a principal cause of the failure of the merger to be consummated by the outside date (or if such failure of the merger to be consummated principally resulted from such breach or failure to perform);

 

   

a restraint enjoining, making illegal or otherwise prohibiting the consummation of the merger is in effect and has become final and nonappealable; provided that a party will not be able to so terminate the merger agreement if such party’s breach of its obligations with respect to governmental approvals (as described above under “The Merger Agreement—Reasonable Best Efforts and Certain Pre-Closing Obligations”) has been a principal cause of the issuance or entry of the restraint (or if the issuance or entry of such restraint principally resulted from such breach), or if such party failed to use the required efforts to prevent the entry of and to remove such restraint in accordance with its obligations under the merger agreement; or

 

   

the holders of Soliton common stock fail to adopt the merger agreement at the special meeting (including any adjournments and postponements thereof).

AbbVie can terminate the merger agreement before the effective time of the merger if:

 

   

our Board or any committee thereof makes an adverse recommendation change; or

 

   

Soliton breaches any of its representations or warranties or fails to perform any of its covenants or agreements contained in the merger agreement, which breach or failure to perform would give rise to the failure to satisfy certain conditions to the closing of the merger, and such breach or failure cannot be cured by the outside date or, if capable of being cured by the outside date, Soliton shall not have cured the breach or failure to perform within 30 calendar days (but in no event later than the outside date) following receipt by Soliton of written notice of such breach or failure to perform from AbbVie (provided that neither AbbVie nor Merger Sub is then in material breach of any representation, warranty, agreement or covenant contained in the merger agreement).

 

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Soliton can terminate the merger agreement:

 

   

prior to the Stockholder Approval, in connection with entering into a company acquisition agreement with respect to a superior proposal, subject to payment of the related termination fee (as set forth below) and subject to such superior proposal not resulting from a material breach of the sections of the merger agreement pertaining to takeover proposals (as described above under “The Merger Agreement—No Solicitation of Takeover Proposals” and “—Change in Board Recommendation”) with respect to such superior proposal and any takeover proposal that was a precursor thereto; or

 

   

before the effective time of the merger, if either AbbVie or Merger Sub breaches any of its representations or warranties or fails to perform any of its covenants or agreements contained in the merger agreement, which breach or failure to perform would give rise to the failure to satisfy certain conditions to the closing of the merger, and such breach or failure cannot be cured by the outside date or, if capable of being cured by the outside date, AbbVie and Merger Sub shall not have cured the breach or failure to perform within 30 calendar days (but in no event later than the outside date) following receipt by AbbVie or Merger Sub of written notice of such breach or failure to perform from Soliton (provided that Soliton is not then in material breach of any representation, warranty, agreement or covenant contained in the merger agreement).

Soliton Termination Fee

Soliton will be required to pay AbbVie a termination fee of $18,625,000 if the merger agreement is terminated:

 

   

by either AbbVie or Soliton because (i) the holders of Soliton common stock fail to adopt the merger agreement at the special meeting or (ii) the merger is not consummated by the outside date, and, in each such case, (A) a bona fide takeover proposal has been publicly made, proposed, or communicated to Soliton, or has otherwise become publicly known, after the date of the merger agreement and prior to (x) in the case of a termination because the holders of Soliton common stock fail to adopt the merger agreement, the date of the special meeting (including any adjournment or postponement thereof) or (y) in the case of a termination because the merger is not consummated by the outside date, the date of termination, and (B) at any time within 12 months of such termination, (x) Soliton enters into a company acquisition agreement with respect to any takeover proposal, or (y) Soliton consummates any takeover proposal (in each case, whether or not such takeover proposal is the same takeover proposal referred to in clause (A) and provided that the term “takeover proposal” will have the meaning as set forth above under “The Merger Agreement—No Solicitation of Takeover Proposals” except that all references to 20% will be deemed to be references to 50%);

 

   

by Soliton, prior to the Stockholder Approval, in connection with entering into a company acquisition agreement with respect to a superior proposal; or

 

   

by AbbVie because the Board or a committee thereof makes an adverse recommendation change.

The parties have agreed that in no event will Soliton be required to pay the termination fee on more than one occasion. The termination fee, if paid, will be the sole and exclusive monetary damages remedy of AbbVie, Merger Sub and their respective subsidiaries and any of their respective former, current or future officers, directors, partners, shareholders, managers, members or affiliates (the “AbbVie related parties”) against Soliton and any of its former, current or future officers, directors, partners, shareholders, managers, members or affiliates (the “Soliton related parties”) for any losses or damages suffered as a result of the failure of the transactions contemplated by the merger agreement to be consummated or for a breach or failure to perform under the merger agreement or otherwise, except that:

 

  (i)

if Soliton fails promptly to pay the termination fee due to AbbVie, AbbVie and Merger Sub may also be entitled to payment from Soliton for certain costs and expenses of enforcement and for certain interest accrued on such unpaid termination fee,

 

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  (ii)

AbbVie may also be entitled to repayment from Soliton of certain fees paid to Soliton prior to termination, as described below under “The Merger Agreement—AbbVie Additional Payments and Termination Fee—Additional Payments,” and

 

  (iii)

neither Soliton nor any Soliton related party will be relieved from liability for damages arising from a willful and material breach of the merger agreement or from actual fraud.

AbbVie Additional Payments and Termination Fee

Additional Payments

AbbVie has agreed to pay Soliton a fee of $6,000,000 within two business days after the later of September 8, 2021 and the date of the Stockholder Approval, but only if (i) the closing of the merger has not occurred on or before that date (and the merger agreement has not been terminated), and (ii) as of that date, all conditions to the obligation of AbbVie and Merger Sub to effect the merger either have been satisfied or waived or are then capable of being satisfied, except for one or more of the conditions relating to the waiting period under the HSR Act, the absence of restraints (where the relevant restraint arises under antitrust laws), or the absence of pending actions (where the relevant action arises under antitrust laws).

In addition, if AbbVie exercises its right to extend the outside date to February 8, 2022 (as described above under “The Merger Agreement—Termination of the Merger Agreement”), AbbVie will be required to pay Soliton an additional fee of $11,500,000 by no later than November 8, 2021. The amount of this fee will be increased by $6,000,000 (to a total of $17,500,000) if Soliton has not been paid the $6,000,000 fee described in the previous paragraph.    

If AbbVie exercises its right to further extend the outside date to May 8, 2022 (as described above under “The Merger Agreement—Termination of the Merger Agreement”), AbbVie will be required to pay Soliton an additional fee of $2,500,000 by no later than February 8, 2022.

The fees described in the preceding three paragraphs are herein referred to collectively as the “additional payments.”

In the event the merger agreement is terminated by either AbbVie or Soliton, Soliton will be required to repay to AbbVie, within one year after termination, any and all additional payments that have been paid to Soliton, except where:

 

   

the merger agreement is terminated by either AbbVie or Soliton because a restraint enjoining, making illegal or otherwise prohibiting the consummation of the merger is in effect and has become final and nonappealable, and such restraint arises under antitrust laws; or

 

   

the merger agreement is terminated by either AbbVie or Soliton because the merger is not consummated by the outside date, and, at the time of such termination, all conditions to the obligation of AbbVie and Merger Sub to effect the merger either have been satisfied or waived or are then capable of being satisfied, except for one or more of the conditions relating to the waiting period under the HSR Act, the absence of restraints (where the relevant restraint arises under antitrust laws), or the absence of pending actions (where the relevant action arises under antitrust laws).

In the circumstances described in the preceding two bullet points, Soliton will not be required to repay to AbbVie any of the additional payments, but the amount of the termination fee (if any) payable by AbbVie to Soliton in connection with termination of the merger agreement will be reduced by the total amount of additional payments that have been paid by AbbVie to Soliton, as further described below.

 

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Termination Fee

AbbVie will be required to pay Soliton a termination fee of $15,000,000 if all of the following requirements are met:

 

   

the merger agreement is terminated by either Soliton or AbbVie because (i) a restraint enjoining, making illegal or otherwise prohibiting the consummation of the merger is in effect and has become final and nonappealable, and such restraint arises under antitrust laws, or (ii) the merger is not consummated by the outside date;

 

   

at the time of such termination all conditions to the obligation of AbbVie and Merger Sub to effect the merger either have been satisfied or waived or are then capable of being satisfied, except for one or more of the conditions relating to the waiting period under the HSR Act, the absence of restraints (where the relevant restraint arises under antitrust laws), or the absence of pending actions (where the relevant action arises under antitrust laws); and

 

   

Soliton’s breach of its obligations under the merger agreement is not the principal cause of (i) in the case of a termination because a restraint enjoining, making illegal or otherwise prohibiting the consummation of the merger is in effect and has become final and nonappealable, the issuance or entry of the such restraint, or (ii) in the case of a termination because the merger is not consummated by the outside date, the failure of the conditions described in the preceding bullet to be satisfied by the outside date.

The amount of this termination fee will be increased by $2,500,000 (to a total of $17,500,000) if AbbVie extends the outside date to February 8, 2022, and by an additional $2,500,000 (to a total of $20,000,000) if AbbVie further extends the outside date to May 8, 2022 (as described above under “The Merger Agreement—Termination of the Merger Agreement”). However, the amount of this termination fee will be reduced by the total amount of any additional payments that are paid to Soliton by AbbVie as described above under “The Merger Agreement—AbbVie Additional Payments and Termination Fee—Additional Payments.” For example, if AbbVie pays Soliton all of the additional payments, then the amount of this termination fee will be reduced by the total amount of such additional payments ($20,000,000) and will therefore be $0.

The parties have agreed that in no event will AbbVie be required to pay the termination fee on more than one occasion. The termination fee, if paid, will be the sole and exclusive monetary damages remedy of Soliton and the Soliton related parties against AbbVie and the AbbVie related parties for any losses or damages suffered as a result of the failure of the transactions contemplated by the merger agreement to be consummated or for a breach or failure to perform under the merger agreement or otherwise, except that (i) if AbbVie fails promptly to pay the termination fee due to Soliton, Soliton may also be entitled to payment from AbbVie for certain costs and expenses of enforcement and for certain interest accrued on such unpaid termination fee, and (ii) neither AbbVie nor any AbbVie related party will be relieved from liability for damages arising from a willful and material breach of the merger agreement or from actual fraud.

Effect of Termination

If the merger agreement is terminated by Soliton or AbbVie in accordance with its terms, the merger agreement will become null and void, with no liability on the part of any party (or any director, officer, or affiliate of such party) to any other party to the merger agreement, except that no such termination will relieve any party from liability for damages to another party resulting from a willful and material breach of the merger agreement or from actual fraud. In the event the merger agreement is terminated, certain provisions of the merger agreement, including but not limited to those related to governing law, Soliton’s and AbbVie’s termination fees, and Soliton’s repayment obligations with respect to certain fees paid by AbbVie prior to termination, will survive the termination.

 

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Amendment, Extension and Waiver

Subject to compliance with applicable law, the merger agreement may be amended by the written agreement of the parties thereto at any time prior to the effective time of the merger, whether before or after the Stockholder Approval, provided that following the Stockholder Approval, if any such amendment or waiver would, by law or the rules of the NASDAQ, require further approval by the holders of Soliton common stock, then the effectiveness of such amendment or waiver will be subject to the approval of the holders of Soliton common stock.

At any time prior to the effective time of the merger, subject to applicable law, any party to the merger agreement may (i) extend the time for the performance of any of the obligations or other acts of the other parties to the merger agreement, (ii) waive any inaccuracies in the representations and warranties of the other party contained in the merger agreement or in any document delivered pursuant thereto and (iii) waive compliance by the other party with any of the agreements contained in the merger agreement or waive any of such party’s conditions. Any such extension or waiver will be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. The failure of any party to the merger agreement to exercise any of its rights under the merger agreement will not constitute a waiver of such rights. Notwithstanding the foregoing, following the Stockholder Approval, there may be no waiver or extension under the merger agreement that decreases the merger consideration or adversely affects the rights of the holders of Soliton common stock without approval by such stockholders.

Governing Law

The merger agreement, the transactions contemplated thereby, and any matters or disputes relating thereto are governed by and will be construed in accordance with the laws of the State of Delaware.

 

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SUPPORT AGREEMENTS

The following is a summary of selected material provisions of the Support Agreements and is qualified in its entirety by reference to the full text of the Remeditex Support Agreement and the Form of Officer Support Agreement. This summary does not purport to be complete and may not contain all of the information about the Support Agreements that may be important to you. You are encouraged to reach each of the Remeditex Support Agreement and the Form of Officer Support Agreement carefully and in their entirety. A copy of the Remeditex Support Agreement is attached as Annex B to this proxy statement and is incorporated into this proxy statement by reference. A copy of the Form of Officer Support Agreement is attached as Annex C to this proxy statement and is incorporated into this proxy statement by reference.

Remeditex Support Agreement

Voting Provisions

Pursuant to the terms of the Remeditex Support Agreement, Remeditex has agreed to vote all of its shares of Soliton common stock in the following manner:

 

   

in favor of the adoption and approval of the merger agreement;

 

   

against any change in the Board;

 

   

against any takeover proposal from a third party unless and until the merger agreement is terminated; and

 

   

against any other action that is intended or could reasonably be expected to impede or interfere with or materially delay the merger;

provided, however, that in the event of a change in the Board’s recommendation, Remeditex will only be required to vote as described above a number of shares of Soliton common stock equal to 35% of the total voting power of the outstanding shares of Soliton common stock. As of June 9, 2021, Remeditex held voting power over 9,214,277 shares of Soliton common stock (approximately 42.7% of the outstanding shares of Soliton common stock).

In addition, Remeditex has appointed AbbVie as Remeditex’s attorney-in-fact and proxy, with full power of substitution, to vote Remeditex’s shares of Soliton common stock in accordance with the terms of the Remeditex Support Agreement.

Except as described above, nothing in the Remeditex Support Agreement limits the rights of Remeditex to vote in favor of or against, or abstain with respect to, any matter presented to the Soliton stockholders. The Remeditex Support Agreement is entered into only in Remeditex’s capacity as a stockholder.

Restrictions on Transfer

Under the terms of the Remeditex Support Agreement, Remeditex has agreed that prior to termination of the Remeditex Support Agreement, Remeditex shall not, subject to certain limited exceptions, directly or indirectly:

 

   

create or permit to exist any liens, other than liens as may be applicable under the Securities Act of 1933, as amended (the “Securities Act”), or other applicable securities laws, on all or any portion of the shares of Soliton common stock or warrants to purchase Soliton common stock held by Remeditex;

 

   

transfer, sell, assign, gift, hedge, pledge or otherwise dispose of, or enter into any derivative arrangement with respect to (collectively, “Transfer”), all or any portion of the shares of Soliton common stock or warrants to purchase Soliton common stock held by Remeditex, or any right or interest therein (or consent to any of the foregoing);

 

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enter into any contract with respect to any Transfer of the shares of Soliton common stock or warrants to purchase Soliton common stock held by Remeditex, or any interest therein;

 

   

grant or permit the grant of any proxy, power-of-attorney or other authorization or consent in or with respect to all or any portion of the shares of Soliton common stock or warrants to purchase Soliton common stock held by Remeditex;

 

   

deposit or permit the deposit of all or any portion of the shares of Soliton common stock held by Remeditex into a voting trust or enter into a voting agreement or arrangement with respect to all or any portion of such shares of Soliton common stock; or

 

   

take or permit any other action that would in any way restrict, limit or interfere with the performance of the Remeditex’s obligations under the Remeditex Support Agreement or the transactions contemplated thereby or otherwise make any representation or warranty therein untrue or incorrect in any material respect or seek to do or solicit any of the foregoing actions, or cause or permit any other person to take any of the foregoing actions.

Termination

The Remeditex Support Agreement will terminate upon the earliest of:

 

   

the effective time of the merger;

 

   

a material modification or amendment of the merger agreement that reduces the consideration payable thereunder;

 

   

the termination of the merger agreement in accordance with its terms; and

 

   

the mutual agreement of the parties.

Officer Support Agreements

Voting Provisions

Pursuant to the terms of the separate Officer Support Agreement entered into by Walter V. Klemp and Christopher Capelli, each of Mr. Klemp and Dr. Capelli has separately agreed to vote all of his shares of Soliton common stock in the following manner:

 

   

in favor of the adoption and approval of the merger agreement;

 

   

against any takeover proposal from a third party unless and until the merger agreement is terminated; and

 

   

against any other action that is intended or could reasonably be expected to impede or interfere with or materially delay the merger.

As of June 9, 2021, Mr. Klemp and Dr. Capelli collectively held voting power over 688,440 shares of Soliton common stock (approximately 3.19% of the outstanding shares of Soliton common stock).

In addition, each of Mr. Klemp and Dr. Capelli has appointed AbbVie as his attorney-in-fact and proxy, with full power of substitution, to vote his shares of Soliton common stock in accordance with the terms of the applicable Officer Support Agreement.

Except as described above, nothing in the Officer Support Agreements limits the rights of the stockholder to vote in favor of or against, or abstain with respect to, any matter presented to the Soliton stockholders. The separate Officer Support Agreements are entered into only in the individual’s capacity as a stockholder and nothing in the Officer Support Agreements restricts in any way a director or officer in the taking of any actions

 

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(or failure to act) in his capacity as a director or officer, or in the exercise of his fiduciary duties as a director or officer, or prevents or is to be construed to create any obligation on the part of any director or officer from taking any action in his capacity as such director or officer.

Restrictions on Transfer

Under the terms of the Officer Support Agreements, each of the stockholders party thereto has agreed that prior to termination of the applicable Officer Support Agreement, he shall not, subject to certain limited exceptions, directly or indirectly:

 

   

create or permit to exist any liens, other than liens as may be applicable under the Securities Act or other applicable securities laws, on all or any portion of his shares of Soliton common stock or warrants to purchase Soliton common stock;

 

   

Transfer all or any portion of his shares of Soliton common stock or warrants to purchase Soliton common stock, or any right or interest therein (or consent to any of the foregoing);

 

   

enter into any contract with respect to any Transfer of his shares of Soliton common stock or warrants to purchase Soliton common stock, or any interest therein;

 

   

grant or permit the grant of any proxy, power-of-attorney or other authorization or consent in or with respect to all or any portion of his shares of Soliton common stock or warrants to purchase Soliton common stock;

 

   

deposit or permit the deposit of all or any portion of his shares of Soliton common stock into a voting trust or enter into a voting agreement or arrangement with respect to all or any portion of such shares of Soliton common stock; or

 

   

take or permit any other action that would in any way restrict, limit or interfere with the performance of the stockholder’s obligations under the applicable Officer Support Agreement or the transactions contemplated thereby or otherwise make any representation or warranty therein untrue or incorrect in any material respect or seek to do or solicit any of the foregoing actions, or cause or permit any other person to take any of the foregoing actions.

Termination

Each of the Officer Support Agreements will terminate upon the earliest of:

 

   

the effective time of the merger;

 

   

a change in the Board’s recommendation;

 

   

a material modification or amendment of the merger agreement that reduces the consideration payable thereunder;

 

   

the termination of the merger agreement in accordance with its terms; and

 

   

the mutual agreement of the parties.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

The following discussion is a summary of the material U.S. federal income tax consequences to holders of Soliton common stock whose shares are converted to cash in the merger. This summary does not address any tax consequences of the merger arising under the laws of any state, local or foreign jurisdiction or U.S. federal laws other than U.S. federal income tax laws and does not address tax considerations applicable to holders who receive cash pursuant to the exercise of appraisal rights. This discussion is based on the Code, applicable U.S. Treasury Regulations promulgated thereunder, published positions of the Internal Revenue Service, court decisions and other applicable authorities, all as in effect as of the date hereof and all of which are subject to change or differing interpretations (possibly with retroactive effect). This discussion does not address all aspects of U.S. federal income taxation that may be applicable to holders of Soliton common stock in light of their particular circumstances or persons subject to special treatment under U.S. federal income tax law, such as:

 

   

entities treated as partnerships for U.S. federal income tax purposes, S corporations or other pass-through entities (and investors therein);

 

   

persons who hold Soliton common stock as part of a straddle, hedging transaction, synthetic security, conversion transaction or other integrated investment or risk reduction transaction;

 

   

U.S. holders whose functional currency is not the U.S. dollar;

 

   

U.S. expatriates and former citizens or long-term residents of the United States;

 

   

persons who acquired Soliton common stock as compensation for services, including, but not limited to through the exercise of employee stock options or otherwise as compensation;

 

   

persons who are accrual method taxpayers subject to special tax accounting rules under Section 451(b) of the Code;

 

   

persons subject to the U.S. alternative minimum tax;

 

   

banks, insurance companies and other financial institutions;

 

   

“controlled foreign corporations,” “passive foreign investment companies,” corporations that accumulate earnings to avoid U.S. federal income tax, and corporations that are subject to the anti-inversion rules of Section 7874 of the Code;

 

   

persons who hold shares of Soliton common stock that may constitute “qualified small business stock” under Section 1202 of the Code or “Section 1244 stock” for purposes of Section 1244 of the Code;

 

   

persons deemed to sell Soliton common stock under the constructive sale provisions of the Code;

 

   

tax-qualified retirement plans;

 

   

“qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds;

 

   

regulated investment companies;

 

   

real estate investment trusts;

 

   

tax-exempt organizations and governmental organizations;

 

   

brokers or dealers in securities or foreign currencies; and

 

   

traders in securities that elect mark-to-market treatment.

Holders of Soliton common stock are encouraged to consult their own tax advisors to determine the particular tax consequences to them of the receipt of cash in exchange for shares of Soliton common stock pursuant to the merger (including the application and effect of any state, local or non-U.S. income and other tax laws).

 

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If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of Soliton common stock, the tax treatment of a partner in the partnership generally will depend upon the status and activities of the partner and the activities of the partnership. Partners in a partnership holding shares of Soliton common stock are encouraged to consult their tax advisors regarding the tax consequences of the merger.

This discussion applies only to persons that hold their shares of Soliton common stock as a capital asset within the meaning of Section 1221 of the Code. We intend this discussion to provide only a general summary of the material U.S. federal income tax consequences of the merger to holders of Soliton common stock. We do not intend it to be a complete analysis or description of all potential U.S. federal income tax consequences of the merger. The U.S. federal income tax laws are complex and subject to varying interpretation. Accordingly, the Internal Revenue Service may not agree with the tax consequences described herein.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Soliton common stock that is:

 

   

an individual who is a citizen or resident of the United States or is treated as such for U.S. federal income tax purposes;

 

   

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

 

   

a trust if it (i) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (ii) has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person; or

 

   

an estate that is subject to U.S. federal income tax on its income regardless of its source.

A “non-U.S. holder” means a beneficial owner (other than a partnership) of Soliton common stock that is not a U.S. holder.

U.S. Holders

Payments with Respect to Shares of Soliton Common Stock

The exchange of shares of Soliton common stock for cash in the merger generally will be a taxable transaction for U.S. federal income tax purposes. In general, a U.S. holder whose shares of Soliton common stock are converted into the right to receive cash in the merger will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of cash received with respect to such shares (determined before the deduction of any applicable withholding taxes) and the U.S. holder’s adjusted tax basis in such shares. A U.S. holder’s adjusted tax basis generally will equal the price the U.S. holder paid for such shares. Such gain or loss generally will be long-term capital gain or loss if the U.S. holder’s holding period for the shares of Soliton common stock exceeds one year at the time of the completion of the merger. Long-term capital gains of non-corporate U.S. holders currently are generally subject to reduced rates of taxation. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different blocks of shares of Soliton common stock at different times or different prices, such U.S. holder must determine its adjusted tax basis, holding period, and gain or loss separately with respect to each block of shares of Soliton common stock. Capital gains recognized by individuals, trusts and estates also may be subject to a 3.8% federal Medicare contribution tax. Stockholders that are individuals, estates or trusts should consult their tax advisors regarding the applicability of the Medicare contribution tax to gain recognized from the disposition of shares of Soliton common stock in the merger.

Information Reporting and Backup Withholding

A U.S. holder may, under certain circumstances, be subject to information reporting and backup withholding (currently at a rate of 24%) with respect to the cash received pursuant to the merger, unless such

 

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holder properly establishes an exemption or provides its correct taxpayer identification number and otherwise complies with the applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a U.S. holder’s U.S. federal income tax liability, if any, provided that such U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner. All U.S. holders surrendering shares of Soliton common stock pursuant to the merger should duly complete and sign, under penalty of perjury, the Internal Revenue Service Form W-9 included as part of the letter of transmittal and return it to the paying agent to provide the information, including such holder’s taxpayer identification number, and certifications necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to us and the paying agent).

Non-U.S. Holders

Payments with Respect to Shares of Soliton Common Stock

A non-U.S. holder generally will not be subject to U.S. federal income tax on any gain recognized on the receipt of cash in exchange for shares of Soliton common stock pursuant to the merger unless:

 

   

the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, is also attributable to a permanent establishment or, in the case of an individual, a fixed base in the United States maintained by the non-U.S. holder), in which case the non-U.S. holder generally will be subject to tax on such gain in the same manner as a U.S. holder and, if the non-U.S. holder is a foreign corporation, such corporation may be subject to an additional branch profits tax at the rate of 30% (or such lower rate as may be specified by an applicable income tax treaty);

 

   

the non-U.S. holder is a non-resident alien individual who is present in the United States for 183 days or more in the taxable year of the Merger and certain other conditions are met, in which case the non-U.S. holder generally will be subject to a 30% tax on the non-U.S. holder’s net gain realized in the merger, which may be offset by U.S. source capital losses of the non-U.S. holder, if any; or

 

   

Soliton is, or has been at any time during the shorter of (i) the five-year period ending on the date of the merger and (ii) the period during which the non-U.S. holder held shares of Soliton common stock, a “United States real property holding corporation” for U.S. federal income tax purposes, and the non-U.S. holder owned (directly, indirectly or constructively) more than 5% of the outstanding shares of Soliton common stock at any time during the applicable period. Soliton believes that it is not, and has not been during the five-year period ending on the date of the merger, a “United States real property holding corporation” for U.S. federal income tax purposes, although there can be no assurances in this regard.

Information Reporting and Backup Withholding

A non-U.S. holder will be subject to information reporting, and in certain circumstances, backup withholding will apply, with respect to the cash received by a non-U.S. holder pursuant to the merger, unless such holder certifies under penalties of perjury that it is not a United States person, as defined under the Code, and the payor does not have actual knowledge or reason to know that the holder is a United States person or such holder otherwise establishes an exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a non-U.S. holder’s U.S. federal income tax liability, if any, provided that such non-U.S. holder furnishes the required information to the Internal Revenue Service in a timely manner. In order to avoid backup withholding, a non-U.S. holder exchanging shares of common stock for cash pursuant to the merger should submit with the letter of transmittal a duly completed and signed applicable Internal Revenue Service Form W-8, which may be obtained from the paying agent or at www.irs.gov.

 

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This summary of material U.S. federal income tax consequences is for general information only and is not tax advice. You are urged to consult your tax advisor with respect to the application of U.S. federal income tax laws to your particular situation as well as any tax consequences arising under the U.S. federal estate or gift tax rules, or under the laws of any state, local, foreign or other taxing jurisdiction.

 

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APPRAISAL RIGHTS

Under Section 262 of the DGCL, you have the right to demand appraisal and to receive payment in cash for the “fair value” of your shares of common stock as determined by the Delaware Court of Chancery, together with interest, if any, as determined by the court, but exclusive of any element of value arising from the accomplishment or expectation of the merger, in lieu of the merger consideration you would otherwise be entitled to pursuant to the merger agreement. These rights are known as appraisal rights. Soliton stockholders electing to exercise appraisal rights must comply with the provisions of Section 262 of the DGCL in order to perfect their rights. Soliton will require strict compliance with the statutory procedures.

The following is intended as a brief summary of the material provisions of the Delaware statutory procedures required to be followed properly and in a timely manner by a Soliton stockholder in order to dissent from the merger and perfect appraisal rights.

This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Section 262 of the DGCL, the full text of which appears in Annex E to this proxy statement. Failure to precisely follow any of the statutory procedures set forth in Section 262 of the DGCL may result in a termination or waiver of your appraisal rights. Moreover, due to the complexity of the procedures for exercising appraisal rights, stockholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. This summary does not constitute any legal or other advice, nor does it constitute a recommendation that you exercise your appraisal rights under 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 of common stock, unless otherwise indicated.

Section 262 of the DGCL requires that stockholders for whom appraisal rights are available be notified not less than 20 days before the stockholders’ meeting where the merger agreement will be voted on that appraisal rights will be available. A copy of Section 262 of the DGCL must be included with such notice. This proxy statement constitutes Soliton’s notice to Soliton stockholders of the availability of appraisal rights in connection with the merger in compliance with the requirements of Section 262 of the DGCL and a copy of Section 262 of the DGCL is attached hereto as Annex E. If you wish to consider exercising your appraisal rights, you should carefully review the text of Section 262 of the DGCL contained in Annex E to this proxy statement, since failure to timely and properly comply 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, you must satisfy each of the following conditions.

 

   

You must deliver to Soliton a written demand for appraisal of your shares before the vote with respect to the merger agreement is taken. 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.

 

   

You must not vote in favor of the adoption of the merger agreement. A vote in favor of the adoption of the merger agreement in person at the special meeting or the submission of a proxy in favor of the merger agreement by mail, over the Internet or by telephone (that is not subsequently revoked), will constitute a waiver of your appraisal rights in respect of the shares so voted and will nullify any previously filed written demands for appraisal. A submitted proxy that does not contain voting instructions will, unless revoked, be voted in favor of the adoption of the merger agreement. Therefore, a Soliton stockholder who submits a proxy and who wishes to exercise and perfect appraisal rights must vote against the merger agreement, abstain from voting on the merger agreement or revoke any previously submitted proxy in favor of the merger agreement.

 

   

You must continue to hold your shares of common stock through the effective date of the merger. Therefore, a Soliton stockholder who is the record holder of shares of common stock on the date the

 

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written demand for appraisal is made but who thereafter transfers the shares prior to the effective date of the merger will lose any right to appraisal with respect to such shares.

 

   

Either (i) any stockholder who has complied with the requirements of Section 262 of the DGCL (or any person who is the beneficial owner of shares of common stock held either in a voting trust or by a nominee on behalf of such person and for which such record holder has complied with such requirements) or (ii) the surviving corporation in the merger, 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 of the merger. Soliton is under no obligation to file any petition and has no present intention of doing so.

 

   

You must otherwise comply with the applicable procedures and requirements set forth in Section 262 of the DGCL.

If you fail to comply with any of these conditions and the merger is completed, you will be entitled to receive the merger consideration (without interest), but you will have no appraisal rights with respect to your shares of common stock.

In addition, because Soliton’s common stock is listed on a national securities exchange and is expected to continue to be listed on such exchange immediately prior to the consummation of the merger, the Delaware Court of Chancery will dismiss appraisal proceedings as to all shares of Soliton common stock unless (i) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of Soliton stock eligible for appraisal or (ii) the value of the consideration provided in the merger for such total number of shares entitled to appraisal exceeds $1 million. We refer to conditions (i) and (ii) as the “ownership thresholds.” At least one of the ownership thresholds must be met in order for Soliton stockholders to be entitled to seek appraisal with respect to such shares of common stock.

All demands for appraisal should be addressed to Soliton, Inc., 5304 Ashbrook Drive, Houston, TX 77081, Attn: Corporate Secretary, and must be delivered before the vote on the merger agreement is taken at the special meeting and should be executed by, or on behalf of, the record holder of the shares of common stock, fully and correctly, as the stockholder’s name appears in the stock ledger. The demand must reasonably inform Soliton of the identity of the Soliton stockholder, and the intention of the Soliton stockholder to demand appraisal of his, her or its shares of common stock.

Beneficial owners who do not also hold their shares of common stock of record may not directly make appraisal demands to Soliton. The beneficial holder must, in such cases, have the registered owner, such as a brokerage firm, bank, trust or other nominee, submit the required demand in respect of those shares. If shares of common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of a demand for appraisal should be made by or for the fiduciary, and if the shares of common stock are owned of record by more than one person, as in a joint tenancy or tenancy in common, the demand should be executed by or for all joint owners. An authorized agent, including an authorized agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the record owner or owners, and expressly disclose the fact that, in executing the demand, he or she is acting as agent for the record owner. A record owner, such as a broker, who holds shares of common stock as a nominee for others, may exercise his or her right of appraisal with respect to the shares of common stock held for one or more beneficial owners, while not exercising this right for other beneficial owners. In that case, the written demand should state the number of shares of common stock as to which appraisal is sought. Where no number of shares is expressly stated, the demand will be presumed to cover all shares held in the name of the record owner.

If you hold your shares of common stock in an account with a broker, bank, trust company or other nominee, and you wish to exercise appraisal rights, you are urged to consult with your broker, bank, trust company or other nominee to determine the appropriate procedures for the making of a demand for appraisal.

 

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Within 10 days after the closing date of the merger, the surviving corporation must give written notice that the merger has become effective to each former Soliton stockholder who has properly made a written demand for appraisal, who did not vote in favor of the adoption of the merger agreement and who has otherwise complied with the requirements of Section 262 of the DGCL. At any time within 60 days after the effective time of the merger, any former Soliton stockholder who has demanded an appraisal and who has not commenced an appraisal proceeding or joined such a proceeding as a named party, will have the right to withdraw the demand for appraisal and to accept the cash payment specified by the merger agreement without interest for his, her or its shares of common stock; after this 60-day period, the former Soliton stockholder may withdraw such demand for appraisal only with the written consent of the surviving corporation. In addition, 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, with such approval conditioned upon such terms as the Delaware Court of Chancery deems just; provided that the foregoing shall not affect the right of any stockholder that has made an appraisal demand but has not commenced an appraisal proceeding or joined such proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the terms of the merger and the merger consideration provided in the merger agreement within 60 days after the effective date of the merger.

Within 120 days after the closing date of the merger, any former Soliton stockholder who has complied with Section 262 of the DGCL will, upon written request to the surviving corporation, be entitled to receive a statement setting forth the aggregate number of shares not voted in favor of the adoption of the merger agreement and with respect to which demands for appraisal have been received, and the aggregate number of holders of such shares. A person who is the beneficial owner of shares of common stock held in a voting trust or by a nominee on behalf of such person may, in such person’s own name, request from the surviving corporation the statement described in the previous sentence. Such statement will be mailed to the requesting former Soliton stockholder within 10 days after such written request is received by the surviving corporation or within 10 days after expiration of the period for delivery of demands for appraisal, whichever is later. Within 120 days after the closing date of the merger, but not thereafter, either the surviving corporation or any former Soliton stockholder who has complied with the requirements of Section 262 of the DGCL, and who is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery demanding a determination of the fair value of the shares of common stock held by Soliton stockholders who have complied with the requirements of Section 262 of the DGCL and who are otherwise entitled to appraisal rights. A person who was the beneficial owner of shares of common stock held in a voting trust or by a nominee on behalf of such person may, in such person’s own name, file the petition described in the previous sentence. Upon the filing of the petition by a former Soliton stockholder, service of a copy of such petition must be made upon Soliton, as the surviving corporation. The surviving corporation has no obligation to file such a petition if there are former Soliton stockholders demanding an appraisal of their shares. Accordingly, the failure of a former Soliton stockholder to file such a petition within the period specified could nullify the former Soliton stockholder’s previously written demand for appraisal and result in the loss of such stockholder’s appraisal rights. There is no present intent on the part of Soliton to file an appraisal petition, and Soliton stockholders seeking to exercise appraisal rights should not assume that Soliton will file such a petition or that Soliton will initiate any negotiations with respect to the fair value of such shares. Accordingly, Soliton stockholders who desire to have their shares appraised should initiate any petitions necessary for the perfection of their appraisal rights within the time periods and in the manner prescribed in Section 262 of the DGCL.

If a petition for appraisal is timely filed by a former Soliton stockholder and a copy of the petition is delivered to the surviving corporation, the surviving corporation will then be obligated, within 20 days after receiving service of a copy of the petition, to file with the Delaware Register in Chancery a duly verified list containing the names and addresses of all former Soliton stockholders who have demanded an appraisal of their shares, and with whom agreements as to the value of their shares have not been reached by the surviving corporation. After notice is made to dissenting former Soliton stockholders who demanded appraisal of their shares as required by the Delaware Court of Chancery, the Delaware Court of Chancery is empowered to conduct a hearing upon the petition to determine those former Soliton stockholders who have complied with Section 262 of the DGCL and who have become entitled to the appraisal rights thereunder. Under Delaware law, the

 

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Delaware Court of Chancery may require former stockholders who have demanded appraisal of their shares and who held stock represented by certificates to submit their stock certificates to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and if any such former stockholder who held stock represented by certificates fails to comply with that direction, the Delaware Court of Chancery may dismiss the proceedings as to that former stockholder. Additionally, and notwithstanding anything herein to the contrary, the Delaware Court of Chancery shall dismiss the appraisal proceeding unless (a) the total number of shares entitled to appraisal exceeds 1% of the outstanding shares of common stock eligible for appraisal or (b) the value of the consideration provided in the merger for such total number of shares of common stock exceeds $1 million.

After the Delaware Court of Chancery determines which former Soliton stockholders are entitled to appraisal of their shares of 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 common stock held by former Soliton stockholders who have complied with the requirements of Section 262 of the DGCL and who are otherwise entitled to appraisal rights, determining the fair value of the shares 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 (or, in certain circumstances described below, on the difference between the amount determined to be the fair value and the amount paid to each stockholder entitled to appraisal prior to the entry of judgment in the appraisal proceeding). 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 (including any surcharge), as established from time to time during the period between the closing date of the merger and the date of payment of the judgment. When the fair value is determined, the Delaware Court of Chancery will direct the payment of such value, with interest thereon accrued during the pendency of the proceeding, if the Delaware Court of Chancery so determines, to the former Soliton stockholders entitled to receive the same (in the case of shares represented by certificates, payment will not be made until such certificates are surrendered to the surviving corporation). Notwithstanding the foregoing, at any time before the entry of judgment in the proceedings, the surviving corporation may pay to each former stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter only upon the sum of (1) the difference, if any, between the amount paid and the fair value of the shares as determined by the Delaware Court of Chancery, and (2) interest theretofore accrued, unless paid at that time.

In determining fair value, and, if applicable, interest, the Delaware Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court 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 which 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.”

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. In Weinberger, the Delaware Supreme Court construed Section 262 of the DGCL to mean 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.”

You should be aware that the fair value of your shares of common stock as determined under Section 262 of the DGCL could be more than, the same as, or less than the value that you are entitled to receive under the terms of the merger agreement if you did not seek appraisal of your shares. Investment banking opinions as to the fairness from a financial point of view of the merger consideration are not necessarily opinions as to fair value under Section 262 of the DGCL.

 

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Costs of the appraisal proceeding may be imposed upon the surviving corporation and the former Soliton stockholders participating in the appraisal proceeding by the Delaware Court of Chancery as the Court deems equitable in the circumstances. Upon the application of a former Soliton stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any former Soliton stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorneys’ fees and the fees and expenses of experts, to be charged pro rata against the value of all shares entitled to appraisal. Any former Soliton stockholder who had demanded appraisal rights will not, after the effective time of the merger, be entitled to vote shares subject to that demand for any purpose, or to receive payments of dividends or any other distribution with respect to those shares, other than with respect to payment as of a record date prior to the effective time of the merger; however, if no petition for appraisal is filed within 120 days after the effective time of the merger, or if the former Soliton stockholder duly delivers a written withdrawal of his, her or its demand for appraisal in accordance with the procedures set forth above, then the right of that former Soliton stockholder to appraisal will cease and that former Soliton stockholder will be entitled to receive the cash payment for shares of his, her or its shares of common stock pursuant to the merger agreement. No appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any former Soliton stockholder without the prior approval of the Court, and such approval may be conditioned upon such terms as the Delaware Court of Chancery deems just; provided, however, that any former Soliton stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party will maintain the right to withdraw its demand for appraisal, and to accept the cash that such holder would have received pursuant to the merger agreement within 60 days after the effective date of the merger.

In view of the complexity of Section 262 of the DGCL, Soliton stockholders who may wish to dissent from the merger and pursue appraisal rights should consult their legal advisors. To the extent there are any inconsistencies between the foregoing summary and Section 262 of the DGCL, Section 262 of the DGCL will govern.

 

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PROPOSAL 2: APPROVAL OF AUTHORITY TO ADJOURN THE SPECIAL MEETING

Stockholders may be asked to vote on a proposal to adjourn the special meeting, if necessary or appropriate, including to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

Approval of the adjournment proposal requires the affirmative vote of the holders of a majority of the shares of common stock represented at the special meeting and entitled to vote thereon.

If you fail to submit a proxy or fail to instruct your broker, bank, trust company or other nominee to vote, it will have no effect on the adjournment proposal, assuming a quorum is present at the special meeting. If you mark your proxy to abstain or provide voting instructions to abstain, it will have the effect of a vote against the adjournment proposal.

The Board unanimously recommends that stockholders vote “FOR” the adjournment proposal.

If you return a properly executed proxy (including proxies received via the Internet or by telephone) but do not indicate instructions on your proxy, your shares of common stock represented by such proxy will be voted “FOR” the adjournment, if necessary.

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table shows the number of shares of Soliton common stock beneficially owned as of June 9, 2021, by (i) each person, or group of affiliated persons, known by Soliton to beneficially own more than 5% of Soliton’s common stock, (ii) each of Soliton’s directors, (iii) each of Soliton’s named executive officers, and (iv) all of Soliton’s directors and executive officers as a group.

Beneficial ownership is determined according to the rules of the SEC, and generally means that person has beneficial ownership of a security if he or she possesses sole or shared voting or investment power of that security and includes options that are currently exercisable or exercisable within 60 days. Each director or officer, as the case may be, has furnished us with information with respect to beneficial ownership. Except as otherwise indicated, we believe that the beneficial owners of Soliton common stock listed below, based on the information each of them has given to us, have sole investment and voting power with respect to their shares, except where community property laws may apply. Except as otherwise noted below, the address for each person or entity listed in the table is c/o Soliton, Inc., 5304 Ashbrook Drive, Houston, TX, 77081.

 

Name of Beneficial Owner

   Shares
beneficially
owned(1)
    Percentage
owned(2)
 

Directors and Executive Officers:

    

Walter V. Klemp

     1,121,067 (3)      5.0

Bradley Hauser

     52,500 (4)      *  

Christopher Capelli, M.D.

     983,507 (5)      4.4

Lori Bisson

     317,450 (6)      1.5

Joe Tanner

     299,375 (7)      1.4

Jonathan P. Foster

     65,000 (8)      *  

Danika Harrison

     52,500 (9)      *  

Michael Kaminer

     15,000 (10)      *  

Niquette Hunt

     —         —  

Directors and Executive Officers as a Group (9 persons)

     2,906,399 (11)      12.3

5% or greater stockholders:

    

Remeditex Ventures(12)

     9,635,085 (13)      43.8

 

*

Less than 1%

(1)

Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act. A person or group is deemed to be the beneficial owner of any shares of Soliton common stock over which such person or group has sole or shared voting or investment power, plus any shares which such person or group has the right to acquire beneficial ownership of within 60 days of June 9, 2021, whether through the exercise of options, warrants or otherwise. Unless otherwise indicated in the footnotes, each person or entity identified in the table has sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

(2)

The beneficial ownership percentage is calculated for each person or group separately because shares of Soliton common stock subject to options, warrants or other rights to acquire Soliton common stock that are currently exercisable or exercisable within 60 days of June 9, 2021 are considered outstanding and beneficially owned by the person or group holding such options, warrants or other rights but not for the purpose of calculating the percentage ownership of any other person or group. As a result, the beneficial ownership percentage for each person or group is calculated by dividing (x) the number of shares reported in the table as beneficially owned by such person or group, by (y) 21,596,544 shares (which represents the number of shares of Soliton common stock that were outstanding as of June 9, 2021) plus the number of shares that such person or group has the right to acquire beneficial ownership of within 60 days of June 9, 2021 as indicated in the footnotes below.

(3)

Consists of (i) 425,000 shares of Soliton common stock, (ii) options to purchase an aggregate of 668,150 shares of Soliton common stock exercisable within 60 days of June 9, 2021 and (iii) warrants to

 

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  purchase an aggregate of 27,917 shares of Soliton common stock exercisable within 60 days of June 9, 2021.
(4)

Consists solely of shares underlying options to purchase Soliton common stock exercisable within 60 days of June 9, 2021.

(5)

Consists of (i) 263,440 shares of Soliton common stock, (ii) options to purchase an aggregate of 692,150 shares of Soliton common stock exercisable within 60 days of June 9, 2021 and (iii) warrants to purchase an aggregate of 27,917 shares of Soliton common stock exercisable within 60 days of June 9, 2021.

(6)

Consists of (i) 60,000 shares of Soliton common stock, (ii) options to purchase an aggregate of 242,450 shares of Soliton common stock exercisable within 60 days of June 9, 2021 and (iii) warrants to purchase an aggregate of 15,000 shares of Soliton common stock exercisable within 60 days of June 9, 2021.

(7)

Consists of (i) 80,000 shares of Soliton common stock and (ii) options to purchase an aggregate of 219,375 shares of Soliton common stock exercisable within 60 days of June 9, 2021.

(8)

Consists of (i) options to purchase an aggregate of 52,500 shares of Soliton common stock exercisable within 60 days of June 9, 2021 and (ii) warrants to purchase an aggregate of 12,500 shares of Soliton common stock exercisable within 60 days of June 9, 2021.

(9)

Consists solely of shares underlying options to purchase Soliton common stock exercisable within 60 days of June 9, 2021.

(10)

Consists solely of shares underlying options to purchase Soliton common stock exercisable within 60 days of June 9, 2021.

(11)

Consists of (i) 828,440 shares of Soliton common stock, (ii) options to purchase an aggregate of 1,994,625 shares of Soliton common stock exercisable within 60 days of June 9, 2021 and (iii) warrants to purchase an aggregate of 83,334 shares of Soliton common stock exercisable within 60 days of June 9, 2021.

(12)

Remeditex Ventures LLC is the record and beneficial owner of the securities set forth in the table, and shares voting and dispositive power over such securities with Malachite Trust, the majority owner of Remeditex Ventures LLC and Lyda Hill. Ms. Hill is the Trustee of the Malachite Trust. By reason of such relationships, Ms. Hill, the Malachite Trust and Remeditex Ventures LLC may be deemed to share voting and dispositive power over the securities owned directly by Remeditex Ventures LLC. Remeditex Ventures LLC, the Malachite Trust and Lyda Hill each disclaims beneficial ownership of the reported securities except to the extent of its or her pecuniary interest therein. The business address of Remeditex Ventures LLC is 2727 N. Harwood St., Suite 200, Dallas, TX 75201.

(13)

Consists of (i) 9,214,277 shares of Soliton common stock and (ii) warrants to purchase an aggregate of 420,808 shares of Soliton common stock exercisable within 60 days of June 9, 2021.

 

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MARKET PRICE AND DIVIDEND INFORMATION

Soliton’s common stock is listed and traded on the NASDAQ under the symbol “SOLY.” As of the record date for the special meeting, Soliton had 21,596,544 shares of common stock issued and outstanding and Soliton had 73 holders of record.

 

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STOCKHOLDER PROPOSALS

If the merger is completed on the expected timeline, Soliton does not expect to hold an annual meeting of stockholders in 2022. If the merger is not completed, or the outside date is extended as described under “The Merger Agreement—Termination of the Merger Agreement,” you will continue to be entitled to attend and participate in Soliton’s annual meetings of stockholders, and we may hold a 2022 annual meeting of stockholders, in which case we will provide notice of or otherwise publicly disclose the date on which the 2022 annual meeting will be held. If the 2022 annual meeting of stockholders is held, stockholder proposals will be eligible for consideration for inclusion in the proxy statement and form of proxy for Soliton’s 2022 annual meeting of stockholders in accordance with Rule 14a-8 under the Exchange Act and Soliton’s bylaws, as described below.

If the 2022 annual meeting of stockholders is held, stockholder proposals to be considered for inclusion in Soliton’s proxy statement and proxy card for the 2022 annual meeting of stockholders pursuant to Rule 14a-8 under the Exchange Act must be submitted in writing to Soliton’s Corporate Secretary at Soliton’s principal executive offices located at 5304 Ashbrook Drive, Houston, TX 77081 no later than November 26, 2021.

For any proposal that a stockholder wishes to propose for consideration at the 2022 annual meeting of stockholders but does not wish to include in the proxy materials for that meeting, Soliton’s bylaws require a notice of the proposal to be delivered not less than 120 days prior to the anniversary of the mailing date of Soliton’s proxy materials for the preceding annual meeting of stockholders. The notice of the proposal also must comply with the content requirements for such notices set forth in our bylaws.

HOUSEHOLDING

The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement or annual report, as applicable, addressed to those stockholders. This process, which is commonly referred to as “householding,” potentially provides extra convenience for stockholders and cost savings for companies.

If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of this proxy statement and wish to receive only one, please contact Soliton at 5304 Ashbrook Drive, Houston, TX 77081, attention of Corporate Secretary. Soliton will promptly deliver, upon oral or written request, a separate copy of this proxy statement to any stockholder residing at an address to which only one copy was mailed. Requests for additional copies should be directed to Soliton, Inc., at 5304 Ashbrook Drive, Houston, TX 77081, attention of Corporate Secretary or by telephone at (844) 705-4866.

 

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WHERE YOU CAN FIND MORE INFORMATION

Soliton files annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including Soliton, who file electronically with the SEC. The address of that site is www.sec.gov.

Investors may also consult Soliton’s website for more information concerning the transaction described in this proxy statement. Soliton’s website is www.soliton.com. The information contained on the websites of Soliton and the SEC is expressly not incorporated by reference into this proxy statement.

You should rely only on the information contained in this proxy statement. No persons have been authorized to give any information or to make any representations other than those contained in this proxy statement and, if given or made, such information or representations must not be relied upon as having been authorized by Soliton or any other person. Soliton has supplied all information contained in this proxy statement relating to Soliton and its affiliates. AbbVie has supplied all information contained in this proxy statement relating to AbbVie, Merger Sub and their affiliates.

If you are a stockholder of Soliton and would like to request documents, please do so by July 10, 2021, to receive them before the special meeting. If you request any documents from Soliton, we will mail them to you by first class mail, or another equally prompt means, within one business day after Soliton receives your request.

If you have any questions about this proxy statement, the special meeting or the merger or need assistance with voting procedures, you should contact:

Saratoga Proxy Consulting, LLC

520 8th Avenue

New York, NY 10018

Stockholders may call toll-free: (888) 368-0379

info@saratogaproxy.com

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. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROXY STATEMENT TO VOTE YOUR SHARES AT THE SPECIAL MEETING. THIS PROXY STATEMENT IS DATED JUNE 15, 2021. 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 CREATE ANY IMPLICATION TO THE CONTRARY.

 

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Table of Contents

Annex A

 

 

AGREEMENT AND PLAN OF MERGER

By and Among

ABBVIE INC.,

SCOUT MERGER SUB, INC.

and

SOLITON, INC.

Dated as of May 8, 2021

 

 


Table of Contents

TABLE OF CONTENTS

 

          Page  
   ARTICLE I   
   The Transactions   

SECTION 1.01.

   The Merger      A-1  

SECTION 1.02.

   Closing      A-2  

SECTION 1.03.

   Effective Time      A-2  

SECTION 1.04.

   Effects of the Merger      A-2  

SECTION 1.05.

   Certificate of Incorporation of the Surviving Corporation      A-2  

SECTION 1.06.

   Directors and Officers of the Surviving Corporation      A-2  
   ARTICLE II   

Effect of the Merger on Capital Stock; Exchange of Certificates;

Equity-Based Awards

 

SECTION 2.01.

   Effect on Capital Stock      A-2  

SECTION 2.02.

   Exchange of Certificates and Book Entry Shares      A-3  

SECTION 2.03.

   Equity-Based Awards      A-5  

SECTION 2.04.

   Payments with Respect to Equity-Based Awards      A-5  

SECTION 2.05.

   Warrants      A-5  

SECTION 2.06.

   Adjustments      A-6  

SECTION 2.07.

   Appraisal Rights      A-6  

SECTION 2.08.

   Withholding Rights      A-6  
   ARTICLE III   
   Representations and Warranties of the Company   

SECTION 3.01.

   Organization; Standing      A-7  

SECTION 3.02.

   Capitalization      A-7  

SECTION 3.03.

   Authority; Noncontravention      A-8  

SECTION 3.04.

   Governmental Approvals      A-9  

SECTION 3.05.

   Company SEC Documents; Undisclosed Liabilities      A-9  

SECTION 3.06.

   Absence of Certain Changes      A-10  

SECTION 3.07.

   Legal Proceedings      A-11  

SECTION 3.08.

   Compliance with Laws; Permits      A-11  

SECTION 3.09.

   Tax Matters      A-11  

SECTION 3.10.

   Employee Benefits      A-13  

SECTION 3.11.

   Labor Matters      A-14  

SECTION 3.12.

   Environmental Matters      A-15  

SECTION 3.13.

   Intellectual Property      A-15  

SECTION 3.14.

   Data Protection; Company Systems      A-17  

SECTION 3.15.

  

No Rights Agreement; Anti-Takeover Laws

     A-18  

SECTION 3.16.

  

Property

     A-18  

SECTION 3.17.

  

Contracts

     A-18  

SECTION 3.18.

  

Insurance

     A-20  

SECTION 3.19.

  

International Trade; Anti-Corruption.

     A-20  

SECTION 3.20.

  

Healthcare and Other Regulatory Compliance

     A-21  

SECTION 3.21.

  

Stockholder Approval

     A-23  

SECTION 3.22.

  

Proxy Statement

     A-23  

SECTION 3.23.

  

Opinion of Financial Advisor

     A-23  

SECTION 3.24.

  

Brokers and Other Advisors

     A-23  

SECTION 3.25.

  

Interested Party Transactions

     A-23  

 

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Table of Contents

TABLE OF CONTENTS

(continued)

 

          Page  
   ARTICLE IV   
   Representations and Warranties of Parent and Merger Sub   

SECTION 4.01.

  

Organization; Standing

     A-24  

SECTION 4.02.

  

Authority; Noncontravention

     A-24  

SECTION 4.03.

  

Governmental Approvals

     A-24  

SECTION 4.04.

  

Ownership and Operations of Merger Sub

     A-25  

SECTION 4.05.

  

Sufficiency of Funds

     A-25  

SECTION 4.06.

  

Brokers and Other Advisors

     A-25  

SECTION 4.07.

  

Information Supplied

     A-25  

SECTION 4.08.

  

Legal Proceedings

     A-25  

SECTION 4.09.

  

Ownership of Company Common Stock

     A-25  

SECTION 4.10.

  

Non-Reliance on Company Estimates, Projections, Forecasts, Forward-Looking Statements and Business Plans

     A-25  

SECTION 4.11.

  

No Other Representations

     A-26  
   ARTICLE V   
   Additional Covenants and Agreements   

SECTION 5.01.

  

Conduct of Business

     A-26  

SECTION 5.02.

  

Solicitation; Change in Recommendation

     A-29  

SECTION 5.03.

  

Efforts

     A-32  

SECTION 5.04.

  

Public Announcements

     A-34  

SECTION 5.05.

  

Access to Information; Confidentiality

     A-34  

SECTION 5.06.

  

Indemnification and Insurance

     A-35  

SECTION 5.07.

  

Rule 16b-3

     A-36  

SECTION 5.08.

  

Employee Matters

     A-36  

SECTION 5.09.

  

Notification of Certain Matters; Stockholder Litigation

     A-38  

SECTION 5.10.

  

Stock Exchange De-listing

     A-38  

SECTION 5.11.

  

Preparation of the Proxy Statement; Stockholders Meeting

     A-38  

SECTION 5.12.

  

Director Resignations

     A-40  

SECTION 5.13.

   Transfer Taxes      A-40  

SECTION 5.14.

   Additional Payments      A-40  
   ARTICLE VI   
   Conditions to the Merger   

SECTION 6.01.

  

Conditions to Each Party’s Obligation to Effect the Merger

     A-41  

SECTION 6.02.

   Conditions to Obligations of Parent and Merger Sub      A-41  

SECTION 6.03.

   Conditions to Obligations of the Company      A-42  

SECTION 6.04.

   Frustration of Closing Conditions      A-42  
   ARTICLE VII   
   Termination   

SECTION 7.01.

  

Termination

     A-43  

SECTION 7.02.

   Effect of Termination      A-44  

SECTION 7.03.

   Termination Fee      A-44  

 

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Table of Contents

TABLE OF CONTENTS

(continued)

 

          Page  
   ARTICLE VIII   
   Miscellaneous   

SECTION 8.01.

  

No Survival of Representations and Warranties

     A-46  

SECTION 8.02.

   Amendment or Supplement      A-47  

SECTION 8.03.

   Extension of Time, Waiver, Etc.      A-47  

SECTION 8.04.

   Assignment      A-47  

SECTION 8.05.

   Counterparts      A-47  

SECTION 8.06.

   Entire Agreement; No Third Party Beneficiaries      A-47  

SECTION 8.07.

   Governing Law; Jurisdiction      A-47  

SECTION 8.08.

   Specific Enforcement      A-48  

SECTION 8.09.

   WAIVER OF JURY TRIAL      A-48  

SECTION 8.10.

   Notices      A-48  

SECTION 8.11.

   Severability      A-50  

SECTION 8.12.

   Definitions      A-50  

SECTION 8.13.

   Fees and Expenses      A-58  

SECTION 8.14.

   Performance of Merger Sub      A-58  

SECTION 8.15.

   Interpretation      A-59  

 

 

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Table of Contents

AGREEMENT AND PLAN OF MERGER

This AGREEMENT AND PLAN OF MERGER, dated as of May 8, 2021 (this “Agreement”), is by and among AbbVie Inc., a Delaware corporation (“Parent”), Scout Merger Sub, Inc., a Delaware corporation and a wholly owned Subsidiary of Parent (“Merger Sub”), and Soliton, Inc., a Delaware corporation (the “Company”). Certain capitalized terms used in this Agreement are defined in Section 8.12.

WHEREAS, upon the terms and subject to the conditions set forth in this Agreement and in accordance with the Delaware General Corporation Law (the “DGCL”), Merger Sub will be merged with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned Subsidiary of Parent;

WHEREAS, the Board of Directors of the Company, acting upon the unanimous recommendation of a committee of the Board of Directors of the Company (the “Strategic Alternatives Committee”), has unanimously (i) determined that this Agreement and the Transactions are advisable, fair to and in the best interests of the Company and its stockholders, (ii) duly authorized and approved the execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Transactions, (iii) declared the execution, delivery and performance by the Company of this Agreement and the consummation of the Transactions advisable, and (iv) resolved to recommend that the Company’s stockholders adopt and approve this Agreement and approve the Merger;

WHEREAS, the Board of Directors of each of Parent and Merger Sub has unanimously duly authorized and approved the execution, delivery and performance by each of Parent and Merger Sub of this Agreement and the consummation by Parent and Merger Sub of the Transactions, and the Board of Directors of Merger Sub has declared this Agreement advisable;

WHEREAS, Parent, in its capacity as sole stockholder of Merger Sub, will approve and adopt this Agreement by written consent immediately following execution of this Agreement;

WHEREAS, concurrently with the execution and delivery of this Agreement, and as a condition and inducement to the willingness of Parent and Merger Sub to enter into this Agreement, Remeditex Ventures LLC, Walter V. Klemp and Christopher Capelli, each as a holder of shares of the common stock, par value $0.001 per share, of the Company (“Company Common Stock”), has delivered to Parent and Merger Sub a support agreement (the “Support Agreement”), dated as of the date hereof, providing that such stockholder has, among other things, agreed to (i) vote all the shares of Company Common Stock beneficially owned by it in favor of the adoption and approval of this Agreement and approval of the Merger, and (ii) support the Merger and the other Transactions, each on the terms and subject to the conditions set forth in the Support Agreement; and

WHEREAS, the Company, Parent and Merger Sub desire to make certain representations, warranties, covenants and agreements in connection with this Agreement.

NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements contained in this Agreement, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows:

ARTICLE I

The Transactions

SECTION 1.01. The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the provisions of the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company, the separate corporate existence of Merger Sub shall thereupon cease, and the Company shall be the surviving corporation in the Merger. The Company, as the surviving corporation after the Merger, is hereinafter referred to as the “Surviving Corporation”.

 

A-1


Table of Contents

SECTION 1.02. Closing. The closing of the Merger (the “Closing”) shall take place at 10:00 a.m. (New York City time) on the date that is three business days following the satisfaction or waiver (to the extent such waiver is permitted by applicable Law) of the conditions set forth in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver (to the extent such waiver is permitted by applicable Law) of those conditions at such time), at the offices of Kirkland & Ellis LLP, 601 Lexington Avenue, New York, New York 10022, or remotely by exchange of documents and signatures (or their electronic counterparts), unless another date, time or place is agreed to in writing by Parent and the Company (the “Closing Date”).

SECTION 1.03. Effective Time. Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger executed in accordance with, and in such form as is required by, the relevant provisions of the DGCL (the “Certificate of Merger), and shall make all other filings, recordings or publications required under the DGCL in connection with the Merger. The Merger shall become effective at the time that the Certificate of Merger is filed with the Secretary of State of the State of Delaware (the “Secretary of State) or, to the extent permitted by applicable Law, at such later time as is agreed to by the parties hereto prior to the filing of such Certificate of Merger and specified in the Certificate of Merger (the time at which the Merger becomes effective is herein referred to as the “Effective Time).

SECTION 1.04. Effects of the Merger. The Merger shall have the effects provided in this Agreement, the Certificate of Merger and as set forth in the applicable provisions, including Section  259, of the DGCL.

SECTION 1.05. Certificate of Incorporation of the Surviving Corporation. At the Effective Time, the certificate of incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended and restated as of the Effective Time to read in its entirety as set forth in Exhibit A attached hereto, and, as so amended, shall be the certificate of incorporation of the Surviving Corporation until thereafter amended as provided therein or by applicable Law (and subject to Section 5.06 hereof). The bylaws of the Surviving Corporation shall be amended and restated as of the Effective Time to be identical to the bylaws of Merger Sub as in effect immediately prior to the Effective Time and, as so amended, shall be the bylaws of the Surviving Corporation until thereafter amended as provided therein or by applicable Law.

SECTION 1.06. Directors and Officers of the Surviving Corporation. (a) The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation immediately following the Effective Time, until their respective successors are duly elected or appointed and qualified or their earlier death, resignation or removal in accordance with the charter and bylaws of the Surviving Corporation.

(b) The officers of the Company immediately prior to the Effective Time shall be the officers of the Surviving Corporation until their respective successors are duly appointed and qualified or their earlier death, resignation or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.

ARTICLE II

Effect of the Merger on Capital Stock; Exchange of Certificates;

Equity-Based Awards

SECTION 2.01. Effect on Capital Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Common Stock or any shares of capital stock of Merger Sub:

(a) Capital Stock of Merger Sub. Each issued and outstanding share of capital stock of Merger Sub as of immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the Surviving Corporation.

 

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Table of Contents

(b) Cancelation of Certain Shares. All shares of Company Common Stock that are owned by the Company as treasury stock immediately prior to the Effective Time shall be canceled and shall cease to exist and no consideration shall be delivered in exchange therefor. All shares of Company Common Stock then held by Parent or Merger Sub shall be canceled and shall cease to exist and no consideration shall be delivered in exchange therefor.

(c) Conversion of Company Common Stock. Each issued and outstanding share of Company Common Stock as of immediately prior to the Effective Time (other than (i) Appraisal Shares to be treated in accordance with Section 2.07 and (ii) shares of Company Common Stock to be canceled in accordance with Section 2.01(b)) shall be converted automatically into and shall thereafter represent only the right to receive $22.60 in cash, without interest (the “Merger Consideration”). As of the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate which immediately prior to the Effective Time represented any such shares of Company Common Stock (each, a “Certificate”) or non-certificated shares of Company Common Stock held in book entry form (each, a “Book Entry Share”) shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration to be paid in consideration therefor upon surrender of such Certificate or Book Entry Share in accordance with Section 2.02(b).

SECTION 2.02. Exchange of Certificates and Book Entry Shares.

(a) Paying Agent. No less than ten business days prior to the mailing of the Proxy Statement, Parent shall designate a bank or trust company reasonably acceptable to the Company to act as agent (the “Paying Agent”) for the payment of the Merger Consideration in accordance with this Article II and, in connection therewith, prior to the Closing Date shall enter into an agreement with the Paying Agent in a form reasonably acceptable to the Company. At or prior to the Effective Time, Parent shall deposit, or cause to be deposited, with the Paying Agent an amount in cash sufficient to pay the aggregate Merger Consideration (such cash being hereinafter referred to as the “Exchange Fund”). Pending its disbursement in accordance with this Section&