Item 1.02. Termination of a Material Definitive Agreement
On April 6, 2023, Pear Therapeutics, Inc. ("Pear" or the "Company") entered into
a Settlement Agreement (the "Settlement Agreement") by and among Perceptive
Credit Holdings III, LP, as Administrative Agent (the "Administrative Agent"),
Perceptive Credit Holdings III, LP, as sole Lender (the "Lender"), the Company,
Pear Therapeutics (US), Inc. ("Pear US", together with the Company, the
"Obligors"), and Pear Therapeutics Securities Corporation ("Pear MSC") in
connection with that certain Amended and Restated Credit Agreement and Guaranty
dated as of March 25, 2022 (as amended, modified, restated or supplemented to
from time to time, the "Credit Agreement") and the Loan Documents (as defined in
the Credit Agreement) in connection therewith. Pursuant to the Settlement
Agreement and in full, complete and final satisfaction of all obligations under
the Credit Agreement and the Loan Documents (inclusive of the early prepayment
fee of $3.6 million) (i) $18.66 million in cash was paid to the Administrative
Agent (the "Pear MSC Distribution") and (ii) the Obligors assigned all of their
rights, title and interest in and to a federal tax refund claim estimated at up
to $4.7 million held by the Obligors against the United State Treasury/Internal
Revenue Service (the "IRS") in connection with those certain amended federal
form 941-x tax returns submitted by the Obligors in February 2023 in respect of
the tax quarters ended March 31, 2021, June 30, 2021, and September 30, 2021
(the "Federal Tax Refund").
In connection with the Settlement Agreement, the Obligors agreed that the
Administrative Agent, on behalf of the Lender, shall have an unsecured claim
against each of the Company and Pear US, which shall be jointly and severally
liable for such unsecured claim, on account of obligations not satisfied by the
Pear MSC Distribution, and the Federal Tax Refund, up to a maximum total claim
amount of $10.4 million (the "Residual Claim Amount"), which claim shall rank
pari passu in right of payment with all other nonpriority general unsecured
claims against each of the Company and Pear US (the "Residual Claim"); provided
that to the extent that the Residual Claim results in recoveries from both Pear
and Pear US, the Residual Claim shall be subject to a single satisfaction up to
the aggregate amount of the Residual Claim Amount.
Item 1.03. Bankruptcy or Receivership.
Voluntary Petition - Chapter 11 Filing
On April 7, 2023 (the "Petition Date"), the Company and its wholly-owned direct
subsidiary, Pear US (together with the Company, the "Debtors"), each commenced a
voluntary case under chapter 11 of the United States Bankruptcy Code in the
United States Bankruptcy Court for the District of Delaware (the "Bankruptcy
Court"). The Debtors have requested that the chapter 11 cases be jointly
administered under the caption In re Pear Therapeutics, Inc., et al. (Case No.
23-10429) (the "Chapter 11 Cases"). The Debtors will continue to operate their
business and manage their property as "debtors-in-possession" pursuant to
sections 1107 and 1108 of the Bankruptcy Code. The Debtors will pursue a sale of
their business or assets pursuant to a competitive bidding and auction process
in accordance with section 363 of the Bankruptcy Code and orders of the
Bankruptcy Court. The Debtors are seeking a variety of "first day" motions
containing customary relief intended to assure the Debtors' ability to continue
their ordinary course operations during the Chapter 11 Cases.
Additional information about the Chapter 11 Cases, including access to
Bankruptcy Court documents filed with the Bankruptcy Court, is available online
at https://cases.stretto.com/PearTherapeutics, a website administered by
Stretto, a third-party bankruptcy claims and noticing agent. Interested parties
who may have questions related to the Chapter 11 Cases may call Stretto at
855-944-1910 (US/Canada Toll Free) or 714-252-6860 (for tolled International
Calls), or via email at TeamPearTherapeutics@stretto.com. The information on
this website is not incorporated by reference into, and does not constitute part
of, this Current Report on Form 8-K.
Item 2.04 Triggering Events That Accelerate or Increase a Direct Financial
Obligation or an Obligation under an Off-Balance Sheet Arrangement.
For purposes of the Settlement Agreement, the Company and Pear US acknowledged
and agreed that outstanding defaults occurred and were continuing under the
Credit Agreement and the Administrative Agent exercised certain rights and
remedies pursuant to the Credit Agreement and Loan Documents as set forth in the
Settlement Agreement. The information contained in Item 1.02 of this Current
Report on Form 8K is incorporated herein by reference.
Item 2.05 Costs Associated with Exit or Disposal Activities.
On April 5, 2023, the Company's board of directions (the "Board") authorized the
termination of approximately 170 employees, or 92% of full-time employees
effective April 7, 2023 and restructured the Company's operations to maintain a
transition team of approximately 15 employees to continue operations in
connection with the Chapter 11 Cases. All
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terminated employees were paid through April 7, 2023, received two weeks' salary
as severance and were asked to sign a separation agreement, which includes a
general release of claims against the Company.
The reduction in force was completed on April 6, 2022 and the Company recorded a
one-time charge of approximately $1.2 million in the second quarter of 2023
related to the reduction in workforce, consisting primarily of one-time
severance payments upon termination of the employees. The Company expects such
payments to be the only direct expense of the reduction in workforce. The
Company does not expect to recognize a stock-based compensation expense for
impacted employees related to vested awards and has not modified the affected
employees' stock awards in a manner that would result in additional expenses.
The severance-related and non-cash charges that the Company expects to incur in
connection with, or as a result of, the workforce reduction, are subject to a
number of assumptions, and actual results may differ materially.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Effective April 6, 2023, in anticipation of the filing of the Chapter 11 Cases
discussed in Item 1.03 above, Corey McCann, M.D., Ph.D. stepped down as the
Company's Chief Executive Officer and President. Christopher D.T. Guiffre, J.D.,
M.B.A., the Company's Chief Operating Officer, and Chief Financial Officer will
serve as the Company's principal executive officer following the departure of
Dr. McCann. Biographical information for Mr. Guiffre can be found in the
Company's 2022 Definitive Proxy Statement filed with the SEC on May 2, 2022
under the heading "Our Management," which is incorporated into this Item 5.02 by
reference.
Dr. McCann will continue to serve as a member of the Board and will provide
consulting services to the Company during the section 363 sale process. He will
be compensated at a rate of $255 per hour for up to 30 hours per week.
In addition, on April 5, 2023, the Board terminated its Severance and Change in
Control Plan and, in connection with the restructuring described in Item 2.05
above, approved limited severance in the form of lump sum cash payments equal to
two weeks of base salary for all departing employees, including Dr. McCann.
Item 7.01. Regulation FD Disclosure.
On April 7, 2023, the Company issued a press release announcing the filing of
the Chapter 11 Cases. A copy of the press release is furnished as Exhibit 99.1
to this Current Report on Form 8-K and is incorporated herein by reference.
The information in Item 7.01 of this Current Report on Form 8-K and Exhibit 99.1
attached hereto are being furnished pursuant to Item 7.01 and shall not be
deemed to be "filed" for the purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, or otherwise subject to the liabilities of that
section, nor shall it be deemed incorporated by reference in any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, except as
expressly set forth by specific reference in such a filing.
Cautionary Information Regarding Trading in the Company's Securities
The Company continues to face certain risks and uncertainties that have been
affecting its business and operations, and these risks and uncertainties may
affect the Company's ability to enter into a transaction for the sale of the
business or a sale of substantially all or part of its assets. This could impact
the outcome of the Chapter 11 Cases. Holders of the Company's equity securities
will likely be entitled to little or no recovery on their investment upon
confirmation, dismissal, or conversion of the Chapter 11 Cases. Pear's
securityholders are cautioned that trading in Pear's securities during the
pendency of the Chapter 11 Cases will be highly speculative and will pose
substantial risks. Trading prices for Pear's securities may bear little or no
relationship to the actual recovery, if any, by holders thereof in Pear's
Chapter 11 Case. Accordingly, Pear urges extreme caution with respect to
existing and future investments in its securities.
Cautionary Statement Regarding Forward-Looking Statements
This Form 8-K includes statements that are, or may be deemed, "forward-looking
statements." In some cases, these forward-looking statements can be identified
by the use of forward-looking terminology, including the terms "believes,"
"estimates," "anticipates," "expects," "plans," "intends," "may," "could,"
"might," "will," "should," "approximately" or, in each case, their negative or
other variations thereon or comparable terminology, although not all
forward-looking statements contain these words. These forward-looking statements
reflect the current beliefs and expectations of
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management made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. We caution you that forward-looking statements
are not guarantees of future performance and that our actual results of
operations, financial condition and liquidity and the development of the
industry in which we operate may differ materially from the forward-looking
statements contained herein. Any forward-looking statements that we make in this
Form 8-K speak only as of the date of such statement, and we undertake no
obligation to update such statements to reflect events or circumstances after
the date of this Form 8-K or to reflect the occurrence of unanticipated events.
The Company's forward-looking statements in this Form 8-K include, but are not
limited to, statements about the Company's plans to pursue a sale of the
business or assets pursuant to chapter 11 of the U.S. Bankruptcy Code and the
timing of any such sales; the Company's intention to continue operations during
the Chapter 11 Cases; the Company's belief that the sale process will be in the
best interest of the Company and its stakeholders; and other statements
regarding the Company's strategy and future operations, performance and
prospects among others. These forward-looking statements are based on current
expectations and beliefs concerning future developments and their potential
effects. There can be no assurance that future developments affecting the
Company will be those anticipated. These forward-looking statements involve a
number of risks, uncertainties (some of which are beyond the Company's control)
or other assumptions that may cause actual results or performance to be
materially different from those expressed or implied by these forward-looking
statements. These risks and uncertainties include, but are not limited to, the
decisions of the Bankruptcy Court? negotiations with the Company's creditors and
any committee approved by the Bankruptcy Court? the risks associated with the
potential adverse impact of the Chapter 11 Cases on the Company's liquidity and
results of operations; changes in the Company's cash needs as compared to its
historical operations or its planned reductions in operating expense; changes in
the Company's ability to meet its financial obligations during the Chapter 11
Cases and to maintain contracts that are critical to its operations; the outcome
and duration of the Chapter 11 Cases and any potential asset sales; the effect
of the Chapter 11 Cases and any potential asset sales on the Company's
relationships with vendors, regulatory authorities, employees and other third
parties; possible proceedings that may be brought by third parties in connection
with the Chapter 11 Cases or the potential asset sales; uncertainty regarding
obtaining Bankruptcy Court approval of a sale of the Company's assets or other
conditions that may be required to accompany any potential asset sale; and the
timing or amount of distributions, if any, to the Company's stakeholders.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
99.1 Press Release, dated April 7, 2023
104 Inline XBRL for the cover page of this Current Report on Form 8-K.
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