Saturday, August 4, 2012

From KV's Declaration in Support of its Chapter 11 Petition

As of July 19, 2012, KV had 40,000 shares of 7% Cumulative Convertible Preferred Stock (the “Preferred Stock”) outstanding. Each share of Preferred Stock is convertible at the holder’s option into Class A Common Stock (“Class A Common Stock”). KV also has 49,007,569 outstanding shares of Class A Common Stock held by approximately 649 record holders, 11,075,435 outstanding shares of Class B Common Stock (the “Class B Common Stock”) held by approximately 257 record holders, and outstanding warrants to purchase Class A Common Stock. [...]

With the steadfast belief that the value of Makena® would be realized if the FDA enforced the orphan drug exclusivity granted to KV, in May 2012, the Company engaged in preliminary discussions with an ad hoc group of Convertible Noteholders regarding the potential provision of financing to the Company outside of a bankruptcy filing as well as extending a “put” right of the Convertible Noteholders under the terms of the Indenture governing the Convertible Notes, which put right may be exercised in May 2013. Although the ad hoc group of Convertible Noteholders, through its advisors, conducted certain diligence and provided a term sheet to the Company in respect of extending the put right, as a result of, among other things, the Company’s looming payment to Hologic, the parties were unable to come to an agreement.

Thereafter, in July 2012, after the commencement of the FDA Action, the Company and its advisors restarted discussions with the ad hoc group of Convertible Noteholders as well as an ad hoc group of Senior Noteholders regarding a potential restructuring, with a view towards obtaining a favorable result from the FDA Action.

During this time, the Company also attempted to negotiate an amendment to the Hologic Agreement to provide a much needed breathing spell, including, an extension of the looming August 4, 2012 payment. However, the Company was unsuccessful in obtaining a timely extension of the milestone payment owed to Hologic on terms that were acceptable to the Company. As a result, the Company was forced to file these chapter 11 cases.

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