Pisano, Nick
`
`From:
`Sent:
`To:
`Cc:
`Subject:
`Attachments:
`
`Pisano, Nick
`Friday, December 15, 2017 5:42 PM
`'James Gorman'
`'Timothy Devlin'; 'ggardella@gardellagrace.com'; Gray, Justin E.; Patino, Joe
`RE: Fulfillium v. ReShape - Follow Up Regarding Monday's Conversation
`ReShape - Proposed Stipulated Protective Order.docx; EnteroMedics October 3 8-K
`filing.pdf
`
`Dear James:
`
`Further to my e-mail below, we have determined that we should be able produce the Disclosure Schedules
`referenced in the Merger Agreement shortly after the parties agree to a suitable protective order for the
`case. The full text of the Merger Agreement is set out in the attached 8-K.
`
`To that end, attached is a draft Protective Order modeled after Magistrate Judge Abram’s preferred order,
`which is available at: http://www.cacd.uscourts.gov/honorable-paul-l-abrams Please let us have your
`comments on the attached draft at your earliest convenience.
`
`We are available for a Rule 26(f) conference next week, any time Wednesday through Friday (December 20-
`22) after 10:00 am Pacific. Please let us know which day/time works for your schedule.
`
`Regards,
`
`Nick
`
`Nicola A. Pisano
`Foley & Lardner LLP
`3579 Valley Centre Drive | Suite 300
`San Diego, CA 92130
`P 858.847.6877
`
`View My Bio
`Visit Foley.com
`
`
`From: Pisano, Nick
`Sent: Thursday, December 14, 2017 10:31 AM
`To: 'James Gorman'
`Cc: Timothy Devlin; ggardella@gardellagrace.com; Gray, Justin E.; Patino, Joe
`Subject: RE: Fulfillium v. ReShape - Follow Up Regarding Monday's Conversation
`
`Dear James:
`
` I
`
` am looking into availability of what I understand to be the requested documents (i.e., non-privileged
`disclosure schedules mentioned on page 3 of the Enteromedics 8-K of October 3, 2017) in the near-term,
`
`1
`
`RESHAPE 1028
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`

`

`subject to agreement on a Protective Order. If there are other documents that Fulfillium will be seeking to
`determine whether it will agree to the proposed substitution of ReShape Medical LLC for merged-out
`ReShape Medical, Inc., please let me know. Obviously, the more voluminous the request, the more difficulty
`there will be in promptly accommodating that request as we head into the holidays.
`
` I
`
` will get back to you later today regarding the disclosure schedules mentioned above, and we can then
`jointly decide on a day/time for a Rule 26(f) call next week.
`
`Regards,
`
`Nick
`
`Nicola A. Pisano
`Foley & Lardner LLP
`3579 Valley Centre Drive | Suite 300
`San Diego, CA 92130
`P 858.847.6877
`
`View My Bio
`Visit Foley.com
`
`
`From: James Gorman [mailto:jgorman@devlinlawfirm.com]
`Sent: Thursday, December 14, 2017 5:32 AM
`To: Pisano, Nick
`Cc: Timothy Devlin; ggardella@gardellagrace.com; Gray, Justin E.; Patino, Joe
`Subject: Fulfillium v. ReShape - Follow Up Regarding Monday's Conversation
`
`Hi Nick,
`
`We have some follow up questions regarding the possibility of a 26f. Would your side be able to do a 26f in the next
`week? Also, would your side produce the relevant documents right away with a discovery request or would you take the
`30 days? Thank you.
`
`Best,
`
`James
`
`James G Gorman III
`Devlin Law Firm LLC
`1306 N Broom Street, Suite 1
`Wilmington, DE 19806
`
`Office: (302) 449-9007
`jgorman@devlinlawfirm.com
`http://www.devlinlawfirm.com/
`
`***********************************************************
`The information contained in this communication is confidential and is intended only for the use of the intended addressee. It is the
`property of Devlin Law Firm LLC, and may contain information subject to attorney-client privilege and/or may constitute inside
`information. Unauthorized use, disclosure or copying of this communication or any part thereof is strictly prohibited and may be
`unlawful. If you have received this communication in error, please notify us immediately by return e-mail or by e-mail
`to correspondence@devlinlawfirm.com, and destroy this communication and all copies thereof, including all attachments.
`
`2
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`

`ENTEROMEDICS INC
`
`FORM 8-K
`
`(Current report filing)
`
`Filed 10/03/17 for the Period Ending 10/02/17
`
`
`Address
`
`
`2800 Patton Rd
`St Paul, MN, 55113
`651-634-3003
`Telephone
`0001371217
`CIK
`ETRM
`Symbol
`3845 - Electromedical and Electrotherapeutic Apparatus
`SIC Code
`Advanced Medical Equipment & Technology
`Industry
`Sector Healthcare
`Fiscal Year
`12/31
`
`http://www.edgar-online.com
`© Copyright 2017, EDGAR Online, a division of Donnelley Financial Solutions. All Rights Reserved.
`Distribution and use of this document restricted under EDGAR Online, a division of Donnelley Financial Solutions, Terms of Use.
`
`RESHAPE 1028
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`

`

` 
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington, D.C. 20549
`FORM 8-K
`CURRENT REPORT
`Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
`
`Date of Report (Date of earliest event reported): October 2, 2017
`ENTEROMEDICS INC.
`(Exact name of registrant as specified in its charter)
`
`Delaware
`(State or other jurisdiction of 
`incorporation)
`
` 
`
` 
`
`1-33818
`(Commission File Number)
`
` 
`
` 
`
`48-1293684
`(I.R.S. Employer Identification 
`Number)
`
`2800 Patton Road
`St. Paul, Minnesota
`(Address of principal executive offices)
`
` 
`
` 
`
`55113
`(Zip Code)
`
`(651) 634-3003
`(Registrant’s telephone number, including area code)
`
`Not applicable.
`(Former name or former address, if changed since last report)
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following
`provisions:
` 
`
`o
`Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
`
`x
`Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
`
`o
`Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
`
`o
`Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
`
` 
`
` 
`
` 
`
` 
`
`Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter)
`or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
` 
`
`Emerging growth company  o
`
` 
`
`If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or
`revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o
` 
` 
`
`RESHAPE 1028
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`

` 
`Item 1.01.                                      Entry into a Material Definitive Agreement.
` 
`Merger
`Agreement
` 
`
`On October 2, 2017, EnteroMedics Inc., a Delaware corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”)
`with ReShape Medical, Inc., a Delaware corporation (“ReShape”), Nixon Subsidiary Inc., a Delaware corporation and wholly owned subsidiary of the Company
`(“Merger Sub”), Nixon Subsidiary Holdings LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Sub LLC”), and
`HealthCor Partners Fund II, L.P. and Endeavour Medtech GP Limited, solely in their capacity as members of the committee (the “ReShape Holder Committee”)
`representing the ReShape stockholders and convertible promissory note holders receiving a portion of the merger consideration (the “ReShape Holders”). Pursuant
`to the Merger Agreement, among other things, Merger Sub initially merged with and into ReShape, with ReShape surviving as a wholly owned subsidiary of the
`Company (the “Merger”) and, subsequently, ReShape merged with and into Sub LLC, with Sub LLC as the surviving company and a wholly owned subsidiary of
`the Company. The Merger has been approved by the board of directors of the Company (the “Board”), by the boards of directors of Merger Sub and ReShape, by
`the sole member of Sub LLC, and by the stockholders of ReShape.
` 
`
`The aggregate merger consideration paid by the Company for all of the outstanding shares of capital stock and securities convertible into shares of capital
`stock of ReShape is: (i) 2,356,729 shares of common stock, par value $0.01 per share, of the Company (“Common Stock”), (ii) 187,772 shares of newly created
`series C convertible preferred stock, par value $0.01 per share, of the Company (“Series C Preferred Stock”), which shares will become convertible into 18,777,200
`shares of Common Stock subject to and contingent upon the post-closing approval of the Company’s stockholders in accordance with the NASDAQ Stock Market
`Rules, as described in more detail below, and (iii) approximately $5 million in cash, which amount, together with ReShape’s cash on-hand, will be immediately
`used to pay ReShape’s outstanding senior secured indebtedness and certain transaction expenses of ReShape. The Series C Preferred Stock has a liquidation
`preference of $274.8774 per share, or $2.748774 per underlying share of Common Stock. Holders of the Series Preferred Stock have the right to convert their
`shares into shares of Common Stock, assuming the required stockholder approval is obtained, instead of receiving the liquidation preference.  At the closing of the
`Merger, 22,198 shares of Series C Preferred Stock were deposited with an escrow agent to fund post-closing indemnification obligations of the ReShape Holders.
` 
`
`The shares of Common Stock issued at the closing of the Merger represent approximately 19.9% of the total outstanding shares of Common Stock
`immediately prior to the Merger and approximately 16.6% of the total outstanding shares of Common Stock immediately following the Merger. Collectively, the
`shares of Common Stock and Series C Preferred Stock issued in connection with the Merger represent approximately 49.0% of the issued and outstanding capital
`stock of the Company following the Merger, assuming the conversion of the Series C Preferred Stock and all of the Company’s other outstanding shares of
`preferred stock into shares of Common Stock. The ReShape Holders will not be permitted to convert their shares of Series C Preferred Stock into shares of
`Common Stock to the extent such conversion would cause them to hold more than 49.0% of the Company’s outstanding voting securities at the time of any such
`conversion. Other than with respect to certain specific matters set forth in the Certificate of Designation of Preferences, Rights and Limitations of Series C
`Preferred Stock (the “Series C Certificate of Designation”), shares of Series C Preferred Stock will be non-voting until the receipt of the required Company
`stockholder approval and their conversion in shares of common Stock. Upon the post-closing approval of the Company’s stockholders, a portion of the shares of
`Series C Preferred Stock will automatically convert into approximately 8,238,400 shares of Common Stock and the remaining shares of Series C Preferred Stock
`will thereafter be convertible into shares of Common Stock at the option of the holders of the shares. However, if the volume weighted average price of the
`Common Stock exceeds $5.00 per share for at least 20 trading days, then all outstanding shares of Series C Preferred Stock will automatically convert into shares of
`Common Stock. The foregoing description of the preferences, rights and limitations of the Series C Preferred Stock does not purport to be complete and is subject
`to, and qualified in its entirety by reference to, the full text of
` 
`
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`RESHAPE 1028
`
`

`

` 
`the Series C Certificate of Designation, which is filed as Exhibit 3.1 to this report and is incorporated herein by reference.
` 
`
`Approval by the Company’s stockholders was not required in connection with the closing of the Merger and the issuance of shares of Common Stock and
`Series C Preferred Stock in connection with the Merger. Under the terms of the Merger Agreement, the Company has agreed to use commercially reasonable
`efforts to call and hold a meeting of the Company’s stockholders to obtain the requisite approval for the conversion of the Series C Preferred Stock into shares of
`Common Stock, for purposes of the NASDAQ Stock Market Rules, no later than December 31, 2017 and, if such approval is not obtained at that meeting, to obtain
`such approval at an annual or special stockholders meeting to be held at least every six months thereafter.
` 
`
`As long the ReShape Holders own at least 10% of the outstanding Common Stock (for this purpose treating as outstanding the shares of Common Stock
`issuable upon conversion of the Series C Preferred Stock), the ReShape Holder Committee will have the right to designate for nomination two directors to the
`Board, and the Company will nominate and use commercially reasonable efforts to appoint each such person to the Board, although any nominees must be
`reasonably acceptable to the Company’s then current Board members. At the closing of the Merger, Michael Y. Mashaal, M.D. was appointed to the Board as a
`designee of the Company Holder Committee, as discussed in Item 5.02 below.
` 
`
`The foregoing description of the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text
`of the Merger Agreement, which is filed as Exhibit 2.1 to this report and is incorporated herein by reference. The Merger Agreement and related description are
`intended to provide you with information regarding the terms of the Merger Agreement and are not intended to modify or supplement any factual disclosures about
`the Company in its reports filed with the Securities and Exchange Commission (the “SEC”). In particular, the Merger Agreement and related description are not
`intended to be, and should not be relied upon as, disclosures regarding any facts and circumstances relating to the Company. The assertions embodied in the
`representations and warranties made by ReShape in the Merger Agreement are qualified in information contained in disclosure schedules that ReShape has
`delivered to the Company in connection with the signing of the Merger Agreement made for purposes of allocating contractual risk between the parties to the
`Merger Agreement instead of establishing these matters as facts. The representations and warranties also may be subject to a contractual standard of materiality
`different from those generally applicable under the securities laws. Stockholders of the Company are not third-party beneficiaries under the Merger Agreement and
`should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the
`Company, ReShape or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and warranties
`may change after the date of the Merger Agreement.
` 
`Voting
`and
`Standstill
`Agreements
` 
`
`On October 2, 2017, in connection with and as a condition to the execution of the Merger Agreement, the Company and each ReShape Holder who will
`hold at least 5% of the outstanding Common Stock (on an as-converted basis) after the Merger entered into a voting and standstill (the “Voting and Standstill
`Agreements”) pursuant to which such ReShape Holders agreed to (i) vote all shares of Common Stock in the same manner as and in the same proportion as the
`votes cast on the matter by the holders of the Company’s voting securities entitled to vote on the matter, unless such requirement is waived by the Board, and
`(ii) certain customary standstill provisions pursuant to which such ReShape Holders will refrain from various actions that might relate to the acquisition of control
`of the Company, such as making proposals to acquire the Company or launching a proxy context. The ReShape Holders who entered into a Voting and Standstill
`Agreement are Endeavour Medtech Growth LP, HealthCor Partners Fund II, L.P., New Leaf Ventures I, L.P., SV Life Sciences Fund IV, L.P. and U.S. Venture
`Partners X, L.P. Collectively, the ReShape Holders party to the Voting and Standstill Agreements own approximately 41.9% of the issued and
` 
`
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` 
`outstanding capital stock of the Company following the Merger, assuming the conversion of the Series C Preferred Stock and all of the Company’s other
`outstanding shares of preferred stock into shares of Common Stock.
` 
`
`The foregoing description of the Voting and Standstill Agreements does not purport to be complete and is subject to, and qualified in its entirety by
`reference to, the full text of the form of Voting and Standstill Agreement, which is filed as Exhibit 10.1 to this report and is incorporated herein by reference.
` 
`Item 2.01                                         Completion of Acquisition or Disposition of Assets.
` 
`
`The information contained in Item 1.01 is incorporated herein by reference. The transactions contemplated by the Merger Agreement, including the
`Merger, described in Item 1.01 above were completed on October 2, 2017.
` 
`Item 3.02                                            Unregistered Sales of Equity Securities.
` 
`
`The information contained in Item 1.01 is incorporated herein by reference. The issuance of the Common Stock and Series C Preferred Stock in
`connection with the Merger was intended to be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”),
`pursuant to Section 4(a)(2) thereof and Regulation D promulgated thereunder, based upon appropriate representations and certifications that the Company has
`obtained from the ReShape Holders.
` 
`Item 5.02                                            Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of
`Certain Officers.
`
` 
`
`Pursuant to the terms of the Merger Agreement, the Board elected Michael Y. Mashaal, M.D. as a designee of the ReShape Holder Committee effective as
`of the closing of the Merger. Dr. Mashaal will serve on the Board as a Class I director for a term expiring at the Company’s 2020 annual meeting of stockholders
`and until his successor is duly elected and qualified, or until his earlier death, resignation or removal.
` 
`
`Dr. Mashaal is a Managing Director and Founding Partner of HealthCor Partners Management, L.P., a registered investment advisor that invests primarily
`in growth equity and later stage developmental companies across all sectors of the healthcare and life sciences industry. Dr. Mashaal joined HealthCor Group in
`2005. Previously, from 2000 to 2005, Dr. Mashaal served as a Research Analyst focused on healthcare and biotechnology for several large institutional investment
`firms. Dr. Mashaal graduated from Emory University in 1994 with a B.A. in Biology. After receiving an M.D. at State University of New York at Stony Brook
`School of Medicine in 1998, Dr. Mashaal trained in general surgery at the University Hospital at Stony Brook from 1998 to 1999.
` 
`
`Other than the Merger Agreement pursuant to which the Company agreed to add Dr. Mashaal to the Board, there are no arrangements or understandings
`between Dr. Mashaal and any other person pursuant to which he was selected as a director, nor are there any transactions in which Dr. Mashaal has an interest that
`would be reportable under Item 404(a) of Regulation S-K. Dr. Mashaal will be compensated in accordance with the Company’s non-employee director
`compensation program, which is described on pages 14 through 16 of the Company’s definitive proxy statement filed with the SEC on April 27, 2017.
` 
`
`In accordance with the Company’s customary practice, the Company has entered into its standard form of indemnification agreement with Dr. Mashaal,
`which will require the Company to indemnify him against certain liabilities that may arise as result of his status or service as a director. The description of
`Dr. Mashaal’s indemnification agreements is qualified in its entirety by the full text of the form of indemnification agreement, which is filed as Exhibit 10.2 hereto
`and incorporated herein by reference.
` 
`
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`

` 
`Carl D. Goldfischer, M.D. and Nicholas L. Teti, Jr. resigned from the Board. Dr. Goldfischer resigned on September 30, 2017 and Mr. Teti resigned on
`October 2, 2017, in each case effectively immediately. Their resignations were in connection with the Merger and not the result of any disagreement with the
`Company on any matter relating to the Company’s operations, policies or practices.
` 
`Item 7.01                                            Regulation FD Disclosure.
` 
`
`On October 2, 2017, the Company announced the transaction described in Item 1.01 above. A copy of the press release is furnished as Exhibit 99.1 to this
`report and is incorporated herein by reference.
` 
`
`The information contained in this Item 7.01 and Exhibit 99.1 to this report shall not be deemed to be “filed” for purposes of Section 18 of the Securities
`Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any
`filings made by the Company under the Securities Act or the Exchange Act, except as may be expressly set forth by specific reference in such filing.
` 
`Item 9.01                                            Financial Statements and Exhibits.
` 
`
`(a)          Financial Statements of Businesses Acquired .
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
`The financial statements required by Item 9.01(a) of Form 8-K will be filed by amendment within 71 calendar days after the date upon which this current
`report on Form 8-K must be filed.
`
`(b)  Pro Forma Financial Information .
`
`The pro forma financial information required by Item 9.01(b) of Form 8-K will be filed by amendment within 71 calendar days after the date upon which
`this current report on Form 8-K must be filed.
`
`(c)  Shell Company Information .
`
`Not applicable.
`
`(d)  Exhibits .
`
`Exhibit No.
`2.1*
`
`
`
`3.1
`10.1
`10.2
`
`99.1
`
` 
`
` 
`
` 
`
` 
`
` 
`
`Description
`Agreement and Plan of Merger, dated as of October 2, 2017, by and among EnteroMedics Inc., ReShape Medical, Inc., Nixon
`Subsidiary Inc., Nixon Subsidiary Holdings LLC and the ReShape Holder Committee (filed herewith)
`Certificate of Designation of Preferences, Rights and Limitations of Series C Preferred Stock (filed herewith)
`Form of Voting and Standstill Agreement between EnteroMedics Inc. and certain ReShape Holders (filed herewith)
`Form of Indemnification Agreement between EnteroMedics Inc. and each of its Executive Officers and Directors (incorporated
`herein by reference to Exhibit 10.17 to Amendment No. 1 to the EnteroMedics Inc.’s Registration Statement on Form S-1 filed on
`July 6, 2007 (File No. 333-143265))
`Press Release, dated October 2, 2017 (furnished herewith)
`
`5
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`RESHAPE 1028
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`

`

`  *
`
`             Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to the Merger Agreement (identified therein) have been omitted from this report and will be
`furnished supplementally to the SEC upon request.
`
` 
`Important
`Additional
`Information
`and
`Where
`to
`Find
`It
` 
`
`The Company intends to file a proxy statement and other relevant materials with the SEC to obtain approval from the Company’s stockholders
`of the conversion of the Series C Preferred Stock to be issued to the ReShape Holders in connection with the acquisition into shares of Common Stock (the
`“Stockholder Approval”). INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT AND OTHER
`RELEVANT MATERIALS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY AS THEY BECOME AVAILABLE BECAUSE THEY
`WILL CONTAIN IMPORTANT INFORMATION ABOUT THE STOCKHOLDER APPROVAL. The proxy statement, any amendments or supplements
`to the proxy statement and other relevant documents filed by the Company with the SEC will be available free of charge through the web site maintained
`by the SEC at www.sec.gov or by calling the SEC at telephone number 1-800-SEC-0330. Free copies of these documents may also be obtained from the
`Company’s website at www.enteromedics.com or by writing to: EnteroMedics Inc., 2800 Patton Road, St. Paul, Minnesota 55113, Attention: Investor
`Relations.
` 
`
`The Company and its directors and executive officers are deemed to be participants in the solicitation of proxies from the stockholders of the
`Company in connection with the Stockholder Approval. Information regarding the Company’s directors and executive officers is included in the
`Company’s definitive proxy statement for its 2017 annual meeting of stockholders, which was filed with the SEC on April 27, 2017.
` 
`
`Other information regarding the participants in such proxy solicitation and a description of their direct and indirect interests, by security
`holdings or otherwise, will be included in the proxy statement to be filed in connection with the Stockholder Approval.
` 
`Cautionary
`Statement
` 
`
`The issuance of the securities in the transactions described in this report have not been registered under the Securities Act, or any state securities
`laws and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the
`Securities Act and applicable state securities laws. This report shall not constitute an offer to sell or the solicitation of an offer to buy the securities, nor
`shall there be any sale of the securities in any jurisdiction or state in which such offer, solicitation or sale would be unlawful prior to registration or
`qualification under the securities laws of any such jurisdiction or state.
` 
`
`6
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`

`

`Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by
`the undersigned hereunto duly authorized.
` 
`
`SIGNATURES
`
` 
`
` 
`
` 
` 
`
` 
`Dated: October 3, 2017
` 
`
`ENTEROMEDICS INC.
` 
` 
`By:
`
`/s/ Scott P. Youngstrom
`Scott P. Youngstrom
`Chief Financial Officer and Chief Compliance Officer
`
` 
`
` 
`
`7
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`RESHAPE 1028
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`

`

`Exhibit 2.1
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
`AGREEMENT AND PLAN OF MERGER
`
`BY AND AMONG
`
`ENTEROMEDICS INC.
`
`NIXON SUBSIDIARY INC.
`
`NIXON SUBSIDIARY HOLDINGS LLC
`
`RESHAPE MEDICAL, INC.
`
`AND
`
`HEALTHCOR PARTNERS FUND II, L.P.
`
`AND
`
`ENDEAVOR MEDTECH GP LIMITED
`
`AS THE MEMBERS OF THE COMPANY HOLDER COMMITTEE
`
`OCTOBER 2, 2017
`
`RESHAPE 1028
`
`

`

` 
`
` 
`
`TABLE OF CONTENTS
`
`
`
` 
` 
`ARTICLE I THE MERGER
` 
` 
`The Merger
`Closing and Effective Times
`Organizational Documents of the Surviving Corporation and Surviving LLC
`Directors and Officers of the Surviving Corporation and Surviving LLC
`General Effects of the Mergers
`Merger Consideration; Effect of Merger on Capital Stock of Constituent Corporations; Effect of Secondary Merger on
`Capital Stock and Interests of Constituent Entities
`Effect of Secondary Merger on Stock and LLC Interests
`Payment of Merger Consideration for Company Capital Stock
`Withholding Taxes
`Taking of Further Action
`Tax Treatment
` 
` 
`ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY
` 
` 
`Organization and Good Standing
`Authority and Enforceability
`Governmental Approvals and Consents
`No Conflicts
`Company Capital Structure
`Company Subsidiaries
`Company Financial Statements; Internal Financial Controls
`No Undisclosed Liabilities
`No Changes
`Tax Matters
`Real Property
`Tangible Property
`Intellectual Property
`Company Contracts
`Employee Benefit Plans
`Employment Matters
`Governmental Authorizations
`Litigation
`Insurance
`Compliance with Legal Requirements
`Regulatory Compliance
`Interested Party Transactions
`
`1.1
`1.2
`1.3
`1.4
`1.5
`1.6
`
`1.7
`1.8
`1.9
`1.10
`1.11
`
`2.1
`2.2
`2.3
`2.4
`2.5
`2.6
`2.7
`2.8
`2.9
`2.10
`2.11
`2.12
`2.13
`2.14
`2.15
`2.16
`2.17
`2.18
`2.19
`2.20
`2.21
`2.22
`
` 
`
`Page
`
` 
`2
` 
`2
`2
`3
`3
`3
`
`4
`7
`8
`9
`9
`9
` 
`10
` 
`10
`10
`11
`11
`11
`14
`14
`14
`15
`15
`18
`18
`19
`22
`24
`26
`27
`27
`28
`28
`29
`30
`
`RESHAPE 1028
`
`

`

`3.1
`3.2
`3.3
`3.4
`3.5
`3.6
`3.7
`3.8
`3.9
`3.10
`3.11
`3.12
`3.13
`3.14
`3.15
`3.16
`3.17
`3.18
`3.19
`3.20
`3.21
`3.22
`3.23
`3.24
`3.25
`3.26
`
`Books and Records
`No Brokers
`Inspection; No Other Representations
` 
` 
`ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT, MERGER SUB AND SUB LLC
` 
` 
`Organization and Standing
`Authority and Enforceability
`Governmental Approvals and Consents
`No Conflicts
`Valid Issuance of Parent Payment Shares
`Capitalization
`SEC Documents; Financial Statements
`Merger Sub; Sub LLC
`No Undisclosed Liabilities
`No Changes
`Tax Matters
`Real Property
`Tangible Property
`Intellectual Property
`Parent Contracts
`Employee Benefit Plans
`Employment Matters
`Governmental Authorizations
`Litigation
`Insurance
`Compliance with Legal Requirements .
`Regulatory Compliance
`Interested Party Transactions
`Books and Records
`No Brokers
`Inspection; No Other Representations
` 
` 
`ARTICLE IV ADDITIONAL AGREEMENTS
` 
` 
`Stockholder Approvals
`Third Party Expenses
`NASDAQ Listing of Parent Common Stock
`Reservation of Parent Common Stock; Issuance of Shares of Parent Common Stock
`Parent Board Members
`Payoff Letters; Release of Liens
`Indemnification; Advancement of Expenses; Exculpation and Insurance
`Employee Benefits
`Tax Matters
` 
` 
`ARTICLE V POST-CLOSING INDEMNIFICATION; COMPANY HOLDER COMMITTEE
` 
` 
`Survival of Representations and Warranties
`Indemnification of Parent
`Indemnification of Securityholders
`Limitations
`Order of Recovery; Release of Escrow Fund
`
` 
`
` 
`
`2.23
`2.24
`2.25
`
`4.1
`4.2
`4.3
`4.4
`4.5
`4.6
`4.7
`4.8
`4.9
`
`5.1
`5.2
`5.3
`5.4
`5.5
`
`30
`31
`31
` 
`31
` 
`31
`32
`32
`32
`32
`33
`33
`34
`34
`34
`35
`37
`38
`38
`41
`42
`43
`43
`44
`44
`44
`45
`46
`47
`47
`47
` 
`47
` 
`47
`48
`48
`48
`49
`49
`50
`50
`52
` 
`52
` 
`52
`53
`53
`54
`56
`
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`
`

`

`5.6
`5.7
`5.8
`5.9
`
`Indemnification Claim Procedures
`Third Party Claims
`Sole Remedy
`Company Holder Committee
` 
` 
`ARTICLE VI GENERAL PROVISIONS
` 
` 
`Certain Interpretations
`Amendment
`Waiver
`Assignment
`Notices
`Confidentiality
`Public Disclosure
`Entire Agreement
`No Third Party Beneficiaries
`Specific Performance and Other Remedies
`Severability
`Governing Law
`Exclusive Jurisdiction
`Counterparts
`Legal Representation
`
`6.1
`6.2
`6.3
`6.4
`6.5
`6.6
`6.7
`6.8
`6.9
`6.10
`6.11
`6.12
`6.13
`6.14
`6.15
`
` 
`
` 
`
`57
`57
`58
`58
` 
`59
` 
`59
`60
`60
`60
`60
`62
`62
`62
`62
`62
`63
`63
`63
`64
`64
`
`RESHAPE 1028
`
`

`

` 
`
` 
`Annex
` 
`Annex A
` 
`Exhibit
` 
`Exhibit A-1
`Exhibit A-2
`Exhibit B
`Exhibit C
`Exhibit D
`Exhibit E
` 
`Schedule
` 
`Schedule 1.6(a)
`Schedule 4.8(b)
`Schedule 4.8(c)
` 
`
`INDEX OF EXHIBITS
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
` 
`
`Description
` 
`Certain Defined Terms
` 
`Description
` 
`Form of First Certificate of Merger
`Form of Second Certificate of Merger
`Form of Stockholder Written Consent
`Form of Certificate of Designation of Series C Convertible Preferred Stock
`Form of Escrow Agreement
`Specific Indemnity
` 
`Description
` 
`Certain Company Indebtedness and Third Party Expenses
`Severance Benefits of Certain Continuing Employees
`Bonus Amount
`
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`
`

`

` 
`
` 
`
`AGREEMENT AND PLAN OF MERGER
`
`This AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made and entered into as of October 2, 2017 by and among EnteroMedics Inc., a
`Delaware corporation (“ Parent ”), Nixon Subsidiary Inc., a Delaware corporation and a direct wholly-owned subsidiary of Parent (“ Merger Sub ”), Nixon
`Subsidiary Holdings LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Parent (“ Sub LLC ”), ReShape Medical, Inc., a
`Delaware corporation (the “ Company ”), and HealthCor Partners Fund II, L.P. and Endeavour Medtech GP Limited, as the members of the committee
`representing the Company Holders (the “ Company Holder Committee ”).  All capitalized terms that are used but not defined herein shall have the respective
`meanings ascribed thereto in Annex A .
` 
`
`A.                                     The boards of directors of each of Parent, Merger Sub and the Company, and the sole member of Sub LLC, have determined that it would be
`advisable and in the best interests of each corporation and their respective stockholders and members that Parent acquire the Company through the statutory merger
`of Merger Sub with and into the Company, pursuant to which the Company would become a wholly-owned subsidiary of Parent (the “ Merger ”); and
`(ii) following the effectiveness of the Merger and as part of an integrated plan with the Merger, the statutory merger of the Company with and into Sub LLC (“
`Secondary Merger ” and, collectively with the Merger, the “ Mergers ”), with Sub LLC surviving as a wholly-owned subsidiary of Parent, upon the terms and
`conditions set forth in this Agreement and in accordance with the applicable provisions of Delaware Law, and in furtherance thereof, have approved this
`Agreement, the Mergers and the other transactions contemplated by this Agreement and the Related Agreements (the “ Transactions ”).
` 
`
`B.                                     The parties to this Agreement intend that, for U.S. federal income tax purposes, the   Merger and the Secondary Merger will (i) constitute
`integrated steps in a single “pla