`
`Daniel Sadeh, Esq.
`HALPER SADEH LLP
`667 Madison Avenue, 5th Floor
`New York, NY 10065
`Telephone: (212) 763-0060
`Facsimile: (646) 776-2600
`Email: sadeh@halpersadeh.com
`
`Counsel for Plaintiff
`
`
`UNITED STATES DISTRICT COURT
`EASTERN DISTRICT OF NEW YORK
`
`
`Case No:
`
`
`JURY TRIAL DEMANDED
`
`
`
`CAMERON WEIR,
`
`Plaintiff,
`
`v.
`
`ACASTI PHARMA INC., RODERICK
`CARTER, JAN D’ALVISE, JOHN
`CANAN, and DONALD OLDS,
`
`
`Defendants.
`
`
`
`
`
`
`
`
`
`
`
`COMPLAINT FOR VIOLATIONS OF THE FEDERAL SECURITIES LAWS
`
`Plaintiff Cameron Weir (“Plaintiff”), by Plaintiff’s undersigned attorneys, for Plaintiff’s
`
`complaint against Defendants (defined below), alleges the following based upon personal
`
`knowledge as to Plaintiff and Plaintiff’s own acts, and upon information and belief as to all other
`
`matters, based upon, inter alia, the investigation conducted by and through Plaintiff’s attorneys.
`
`NATURE OF THE ACTION
`
`1.
`
`This is an action against Acasti Pharma Inc. (“Acasti” or the “Company”) and its
`
`Board of Directors (the “Board” or the “Individual Defendants”) for their violations of Sections
`
`14(a) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), 15 U.S.C. §§ 78n(a)
`
`and 78t(a), and Rule 14a-9 promulgated thereunder by the SEC, 17 C.F.R. § 240.14a-9, in
`
`1
`
`
`
`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 2 of 17 PageID #: 2
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`connection with the proposed merger (the “Proposed Transaction”) of Acasti and Grace
`
`Therapeutics, Inc. (“Grace”).
`
`JURISDICTION AND VENUE
`
`2.
`
`The claims asserted herein arise under and pursuant to Sections 14(a) and 20(a) of
`
`the Exchange Act (15 U.S.C. §§ 78n(a) and 78t(a)) and Rule 14a-9 promulgated thereunder by the
`
`SEC (17 C.F.R. § 240.14a-9).
`
`3.
`
`This Court has jurisdiction over the subject matter of this action pursuant to 28
`
`U.S.C. § 1331, and Section 27 of the Exchange Act, 15 U.S.C. § 78aa.
`
`4.
`
`Venue is proper in this District pursuant to 28 U.S.C. § 1391(b) and Section 27 of
`
`the Exchange Act (15 U.S.C. § 78aa(c)) as a substantial portion of the transactions and wrongs
`
`complained of herein had an effect in this District, the alleged misstatements entered and the
`
`subsequent damages occurred in this District, and the Company conducts business in this District.1
`
`5.
`
`In connection with the acts, conduct and other wrongs alleged in this complaint,
`
`Defendants, directly or indirectly, used the means and instrumentalities of interstate commerce,
`
`including but not limited to, the United States mails, interstate telephone communications and the
`
`facilities of the national securities exchange.
`
`PARTIES
`
`6.
`
`Plaintiff is, and has been at all relevant times hereto, an owner of Acasti common
`
`stock.
`
`7.
`
`Defendant Acasti is a biopharmaceutical company that engages in the development
`
`and commercialization of pharmaceutical products for cardiovascular diseases. The Company is
`
`
`1 For example, the Company reportedly participated in conferences in New York City in recent
`years.
`
`2
`
`
`
`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 3 of 17 PageID #: 3
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`incorporated in North Carolina. The Company’s common stock trades on the NASDAQ under the
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`ticker symbol, “ACST.”
`
`8.
`
`9.
`
`Defendant Roderick Carter (“Carter”) is Chairman of the Board of the Company.
`
`Defendant Jan D’Alvise (“D’Alvise”) is President, Chief Executive Officer, and a
`
`director of the Company.
`
`10.
`
`11.
`
`12.
`
`Defendant John Canan (“Canan”) is a director of the Company.
`
`Defendant Donald Olds (“Olds”) is a director of the Company.
`
`Defendants Carter, D’Alvise, Canan, and Olds are collectively referred to herein as
`
`the “Individual Defendants.”
`
`13.
`
`Defendants Acasti and the Individual Defendants are collectively referred to herein
`
`as the “Defendants.”
`
`SUBSTANTIVE ALLEGATIONS
`
`A. The Proposed Transaction
`
`14.
`
`On May 7, 2021, Acasti announced that it had entered into a definitive agreement
`
`to acquire Grace. In connection with the Proposed Transaction, Grace will merge with a new
`
`wholly owned subsidiary of Acasti. Grace stockholders will receive newly issued Acasti common
`
`shares pursuant to an exchange ratio formula set forth in the definitive agreement. Under the terms
`
`of the definitive agreement, immediately following the consummation of the Proposed
`
`Transaction, Acasti’s securityholders on a pro forma basis would own approximately 55% of the
`
`combined company’s common shares, and Grace’s securityholders would own approximately 45%
`
`of the combined company’s common shares.
`
`15.
`
`The press release announcing the Proposed Transaction states, in pertinent part:
`
`
`
`
`3
`
`
`
`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 4 of 17 PageID #: 4
`
`Acasti Announces Definitive Agreement to Acquire Grace Therapeutics, Inc.
`
`May 07, 2021 07:00 ET | Source: Acasti Pharma, Inc.
`
`
`
`Grace provides Acasti with a pipeline of rare and orphan disease programs,
`including 3 clinical stage assets that have received Orphan Drug Designation
`from the FDA
`
`Expects lead asset to complete PK Bridging Study in early 2022, with potential to
`advance directly into a Phase 3 clinical safety trial for Subarachnoid
`Hemorrhage
`
`Combination creates a unique rare disease company with innovative drug
`delivery technologies, and is expected to have ~$64M in cash at closing to
`advance lead clinical assets
`
`LAVAL, Québec, May 07, 2021 (GLOBE NEWSWIRE) -- Acasti Pharma Inc.
`(“Acasti” or the “Company”) (Nasdaq: ACST and TSX-V: ACST) announces it
`has entered into a definitive agreement to acquire Grace Therapeutics, Inc.
`(“Grace”), a privately held emerging biopharmaceutical company focused on
`developing innovative drug delivery technologies for the treatment of rare and
`orphan diseases (the “Proposed Transaction”). Subject to the completion of the
`Proposed Transaction, Acasti will acquire Grace’s pipeline of drug candidates
`addressing critical unmet medical needs with the potential to deliver significant
`value to patients and providers. It is anticipated that the cash at closing of about $64
`million will be principally used to pursue the clinical development of the first two
`assets through Phase 3, and further advance earlier pipeline assets into the clinic.
`The Proposed Transaction has been approved by the boards of directors of both
`companies and is supported by Grace shareholders through voting and lock-up
`agreements with the Company. The transaction remains subject to approval of
`Acasti stockholders, as well as applicable stock exchanges.
`
`The Company has posted a presentation summarizing key highlights of the
`transaction, which is available on both the Acasti and Grace websites. Acasti plans
`to file the required Form S-4 proxy statement with the U.S. Securities & Exchange
`Commission (SEC), which will include detailed disclosures regarding the
`transaction. Following the filing of the required Form S-4, Acasti and Grace
`management plan to host an investor conference call to further discuss the
`anticipated benefits of the acquisition and answer investor questions. Acasti will
`call a shareholder meeting to approve the transaction following the public filing of
`the Form S-4 proxy statement. As the Proposed Transaction moves forward, Acasti
`continues to evaluate strategic options for value creation from its existing assets.
`
`In connection with the Proposed Transaction, Acasti will acquire Grace’s entire
`therapeutic pipeline consisting of three unique clinical stage and multiple pre-
`clinical stage assets supported by an intellectual property portfolio consisting of
`
`4
`
`
`
`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 5 of 17 PageID #: 5
`
`*
`
`*
`
`*
`
`more than 40 granted and pending patents in various jurisdictions worldwide.
`Grace’s product candidates aim to improve clinical outcomes by applying
`proprietary formulation and drug delivery technologies to existing pharmaceutical
`compounds to achieve improvements over the current standard of care or provide
`treatment for diseases with no currently approved therapy. Grace’s three lead
`programs have all received Orphan Drug Designation1 from the U.S. Food & Drug
`Administration (FDA), which could provide up to seven years of marketing
`exclusivity in the United States upon FDA’s approval of the New Drug Application
`(NDA), provided that certain conditions are met.
`
`
`
`Management and Operations
`
`Upon shareholder approval of the Proposed Transaction, the combined companies
`will be led by Jan D’Alvise as president and chief executive officer, and the
`corporation will continue to maintain its corporate headquarters in Laval, Quebec,
`Canada. All Grace employees will transition to Acasti and they will continue to
`maintain an R&D laboratory and commercial presence in North Brunswick, New
`Jersey. The new Board of Directors will be composed of 4 representatives from
`Acasti and 3 from Grace, with more details to be provided in the proxy statement.
`
`About the Proposed Transaction
`
`Pending approval by Acasti shareholders as well as applicable stock exchange
`approvals, Grace will merge with a new wholly owned subsidiary of Acasti. Grace
`stockholders will receive newly issued Acasti common shares pursuant to an
`exchange ratio formula set forth in the definitive agreement. Under the terms of the
`definitive agreement, immediately following the consummation of the Proposed
`Transaction, Acasti’s securityholders on a pro forma basis would own
`approximately 55% of the combined company’s common shares, and Grace’s
`securityholders would own approximately 45% of the combined company’s
`common shares, in each case calculated on a fully-diluted basis, subject to upward
`adjustments in favor of Acasti based on each company’s capitalization and net cash
`balance as set forth in the definitive agreement, with more details to be provided in
`the proxy statement. For illustrative purposes, assuming no adjustments for each
`company’s capitalization and net cash balance, and based on 208,375,549 common
`shares of Acasti currently issued and outstanding, an aggregate of 170,489,086
`common shares of Acasti would be issued to Grace stockholders as consideration
`for the Proposed Transaction.
`
`In connection with the entering into the definitive agreement, Grace stockholders
`representing substantially all of the outstanding shares of Grace have entered into
`voting and lock-up agreements with the Company pursuant to which they have
`agreed, amongst other things to (i) vote their shares of Grace in favor of the
`Proposed Transaction, (ii) be subject to lock-up provisions for a period of 12
`
`5
`
`
`
`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 6 of 17 PageID #: 6
`
`months (subject to certain exceptions), and (iii) support the election of board
`nominees through to the 2023 annual general meeting of shareholders.
`
`The Proposed Transaction is expected to close in calendar Q3 of 2021, immediately
`following approval by Acasti shareholders, subject to any applicable SEC review
`and stock exchange approvals, as well as satisfaction of other closing conditions by
`each company specified in the definitive agreement.
`
`Acasti will take steps to regain compliance with Nasdaq’s minimum bid price
`requirements in connection with the Proposed Transaction, and if required, would
`implement a share consolidation.
`
`Oppenheimer & Co. is acting as Acasti’s financial advisor for the Proposed
`Transaction and Osler, Hoskin & Harcourt, LLP is serving as its legal counsel.
`William Blair & Company, LLC is serving as financial advisor to Grace, with Reed
`Smith, LLP serving as its legal counsel.
`
`The Proposed Transaction is an arm’s length transaction in accordance with the
`policies of the TSX Venture Exchange.
`
`
`*
`
`*
`
`*
`
`
`About Acasti
`
`Acasti is a biopharmaceutical innovator that has historically focused on the
`research, development and commercialization of prescription drugs using OM3
`fatty acids delivered both as free fatty acids and bound-to-phospholipid esters,
`derived from krill oil. OM3 fatty acids have extensive clinical evidence of safety
`and efficacy in lowering triglycerides in patients with hypertriglyceridemia, or
`HTG. CaPre, an OM3 phospholipid therapeutic, was being developed for patients
`with severe HTG.
`
`About Grace
`
`Grace Therapeutics is an emerging biopharmaceutical company focused on rare and
`orphan diseases with high unmet medical needs. Grace’s strategy is to improve
`clinical outcomes using novel drug delivery
`technologies
`to approved
`pharmaceutical compounds and achieve enhanced efficacy, faster onset of action,
`reduced side effects, convenient delivery, and increased patient compliance. Grace
`has a therapeutic pipeline of three unique clinical stage programs, several
`preclinical assets, and a robust intellectual property portfolio of over 40 granted and
`pending patent applications.
`
`16.
`
`On July 15, 2021, Defendants caused to be filed with the SEC a Form 424B3 -
`
`Prospectus (the “Prospectus”) in connection with the Proposed Transaction.
`
`6
`
`
`
`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 7 of 17 PageID #: 7
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`B. The Prospectus Contains Materially False and Misleading Statements and Omissions
`
`17.
`
`The Prospectus, which recommends that Acasti shareholders vote in favor of the
`
`Proposed Transaction, omits and/or misrepresents material information concerning: (i) Acasti’s,
`
`Grace’s, and the combined company’s financial projections; (ii) the financial analyses performed
`
`by Acasti’s financial advisor, Oppenheimer & Co. Inc. (“Oppenheimer ”), in connection with its
`
`fairness opinion; (iii) potential conflicts of interest involving Oppenheimer; (iv) the sales process
`
`leading up to the Proposed Transaction; and (v) potential conflicts of interest involving Company
`
`insiders.
`
`18.
`
`The omission of the material information (referenced below) renders the following
`
`sections of the Prospectus false and misleading, among others: (i) Background of the Merger; (ii)
`
`Recommendation of the Acasti Board of Directors; Acasti’s Reasons for the Merger; and (iii)
`
`Opinion of Acasti’s Financial Advisor.
`
`19.
`
`Unless and until the material misstatements and omissions (referenced below) are
`
`remedied before the August 26, 2021 shareholder vote on the Proposed Transaction, Acasti
`
`shareholders will be forced to make a voting decision on the Proposed Transaction without full
`
`disclosure of all material information. In the event the Proposed Transaction is consummated,
`
`Plaintiff may seek to recover damages resulting from Defendants’ misconduct.
`
`1. Material Omissions Concerning Acasti’s, Grace’s, and the Combined
`Company’s Financial Projections
`
`20.
`
`The Prospectus omits material information concerning Acasti’s, Grace’s, and the
`
`combined company’s financial projections.
`
`21.
`
`The Prospectus provides that, in connection with its fairness opinion, Oppenheimer
`
`reviewed and relied upon the following:
`
`•
`
`financial forecasts and estimates related to Grace prepared by the
`management of Grace, as adjusted by management of Acasti and approved
`
`7
`
`
`
`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 8 of 17 PageID #: 8
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`for Oppenheimer’s use by Acasti (which we refer to as the “Projections”);
`and
`
`• discussions with the senior management and advisors of each of Acasti and
`Grace with respect to the business and prospects of each of Acasti and
`Grace, respectively.
`
`
`See Prospectus at 107.
`
`22.
`
`Yet, the Prospectus fails to disclose any of Acasti’s, Grace’s, or the combined
`
`company’s financial projections, despite the fact that such projections were prepared by the
`
`managements of Grace and Acasti and were relied upon by Oppenheimer in connection with its
`
`fairness opinion and related financial analyses. This information is further material as Acasti
`
`shareholders are expected to own approximately 55% of the combined company, but without
`
`Acasti’s, Grace’s, and the combined company’s financial projections, the Company’s shareholders
`
`cannot adequately evaluate and assess the value of Acasti, Grace, or the combined company.
`
`23.
`
`The disclosure of this information is material because it would provide the
`
`Company’s shareholders with a basis to project the future financial performance of the Company
`
`and combined company and would allow shareholders to better understand the financial analyses
`
`performed by the Company’s financial advisor in support of its fairness opinion. Shareholders
`
`cannot hope to replicate management’s inside view of the future prospects of the Company.
`
`Without such information, which is uniquely possessed by Defendant(s) and the Company’s
`
`financial advisor, the Company’s shareholders are unable to determine how much weight, if any,
`
`to place on the Company’s financial advisor’s fairness opinion in determining whether to vote for
`
`or against the Proposed Transaction.
`
`24.
`
`The above-referenced omitted information, if disclosed, would significantly alter
`
`the total mix of information available to the Company’s shareholders.
`
`
`
`8
`
`
`
`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 9 of 17 PageID #: 9
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`2. Material Omissions Concerning Oppenheimer’s Analyses
`
`25.
`
`In connection with the Proposed Transaction, the Prospectus omits material
`
`information concerning analyses performed by Oppenheimer.
`
`26. With respect to Oppenheimer’s “Selected Public Companies Analyses” and
`
`“Selected Transactions Analysis,” the Prospectus fails to disclose the individual multiples and
`
`financial metrics of each company and transaction Oppenheimer observed in its analyses.
`
`27.
`
`The Prospectus fails to disclose the following concerning Oppenheimer’s
`
`“Discounted Cash Flow Analysis”: (1) the standalone after-tax free cash flows that Grace
`
`management forecasted to be generated during the calendar years ending December 31, 2021
`
`through the calendar year ending December 31, 2031, and all underlying line items; (2) the
`
`terminal values for Grace; (3) the individual inputs and assumptions underlying the (i) range of
`
`declining perpetuity rates of 0.0% to 1.0%, and (ii) discount rates ranging from 10.5% to 11.5%;
`
`and (4) the amount of Grace’s PPP loan.
`
`28. With respect to Oppenheimer’s “Implied Equity Exchange Ratio Range Analysis,”
`
`the Prospectus fails to disclose the individual inputs and assumptions underlying the combined
`
`company’s implied equity values.
`
`29.
`
`The valuation methods, underlying assumptions, and key inputs used by
`
`Oppenheimer in rendering its purported fairness opinion must be fairly disclosed to Acasti
`
`shareholders. The description of Oppenheimer’s fairness opinion and analyses, however, fails to
`
`include key inputs and assumptions underlying those analyses. Without the information described
`
`above, Acasti shareholders are unable to fully understand Oppenheimer’s fairness opinion and
`
`analyses, and are thus unable to determine how much weight, if any, to place on them in
`
`determining whether to vote for or against the Proposed Transaction. This omitted information, if
`
`disclosed, would significantly alter the total mix of information available to the Company’s
`
`9
`
`
`
`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 10 of 17 PageID #: 10
`
`shareholders.
`
`3. Material Omissions Concerning Potential Conflicts of Interest Involving
`Oppenheimer
`
`
`The Prospectus omits material information concerning potential conflicts of interest
`
`30.
`
`involving Oppenheimer.
`
`31.
`
`The Prospectus provides that, “[i]n the two years preceding the date of its opinion,
`
`Oppenheimer . . . did provide investment banking, financial advisory and/or other financial
`
`services to Acasti, for which Oppenheimer received consideration[.]”
`
`32. While the Prospectus provides the compensation Oppenheimer received for acting
`
`as a placement agent to Acasti in connection with Acasti’s at-the-market offering in the first
`
`quarter of 2021, the Prospectus fails to disclose the total amount of compensation Oppenheimer
`
`received or expects to receive for providing services to Acasti within the past two years of the date
`
`of its fairness opinion. See 17 C.F.R. § 229.1015(b)(4) (requiring disclosure of all material
`
`relationships between a company and its financial advisors and the compensation received by the
`
`advisors during the past two years).
`
`33.
`
`Disclosure of a financial advisor’s compensation and potential conflicts of interest
`
`to shareholders is required due to their central role in the evaluation, exploration, selection, and
`
`implementation of strategic alternatives and the rendering of any fairness opinions. Disclosure of
`
`a financial advisor’s potential conflicts of interest may inform shareholders on how much weight
`
`to place on that analysis.
`
`34.
`
`The omission of the above-referenced information renders the Prospectus
`
`materially incomplete and misleading. This information, if disclosed, would significantly alter the
`
`total mix of information available to the Company’s shareholders.
`
`
`
`10
`
`
`
`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 11 of 17 PageID #: 11
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`4. Material Omissions Concerning the Sales Process Leading up to the Proposed
`Transaction
`
`The Prospectus omits material information concerning the sales process leading up
`
`
`35.
`
`to the Proposed Transaction.
`
`36.
`
`The Prospectus provides that, “[i]n the period between September 2020 and early
`
`January 2021, 18 companies signed a confidentiality agreement with Acasti, expressing their
`
`interest in learning more about a transaction with Acasti[.]”
`
`37.
`
`The Prospectus, however, fails to disclose the terms of the Company’s
`
`confidentiality agreements, including whether such agreements contained standstill provisions
`
`with “don’t ask, don’t waive” (DADW) provisions (including their time of enforcement) that
`
`would preclude potentially interested parties from making superior offers for the Company.
`
`38. Without this information, Acasti shareholders may have the mistaken belief that
`
`potential suitors are or were permitted to submit superior proposals for the Company, when in fact
`
`they are or were contractually prohibited from doing so. This information is material because a
`
`reasonable Acasti shareholder would want to know, prior to voting for or against the Proposed
`
`Transaction, whether other potential buyers are or were foreclosed from submitting a superior
`
`proposal.
`
`39.
`
`The above-referenced omitted information, if disclosed, would significantly alter
`
`the total mix of information available to the Company’s shareholders.
`
`5. Material Omissions Concerning Company Insiders’ Potential Conflicts of
`Interest
`
`40.
`
`The Prospectus omits material information concerning potential conflicts of interest
`
`involving Company insiders.
`
`41.
`
`The Prospectus provides that, between April 26, 2021 and April 29, 2021, Acasti
`
`management and Grace management discussed “employee matters.”
`
`11
`
`
`
`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 12 of 17 PageID #: 12
`
`42.
`
`The Prospectus provides the following concerning management and directors of the
`
`combined company following consummation of the Proposed Transaction:
`
`Director Positions Following the Merger
`
`Each of Dr. Roderick N. Carter, Mr. Jean Marie (John) Canan, Mr. Donald
`Olds (collectively “Independent Directors”) and Ms. Jan D’Alvise (President and
`CEO), currently each a member of the Acasti board, is expected to remain a member
`of the board of directors of the combined company and Independent Directors will
`receive compensation to be paid as directors of the combined company. For a
`description of Acasti’s Independent Director compensation policy and the amounts
`paid to Acasti’s directors in fiscal 2020, please see “Executive Compensation” in
`Acasti’s Annual Report on Form 10-K filed with the SEC for the fiscal year ended
`March 31, 2021.
`
`Merger-Related Compensation of Executive Officers
`
`Retention Agreements
`
`the
`review process and upon
`its strategic
`In connection with
`recommendation of its governance and human resources committee, in October
`2020 Acasti entered into retention incentive agreements with Ms. Jan D’Alvise,
`President and Chief Executive Officer, and Mr. Pierre Lemieux, Chief Operating
`Officer and Chief Scientific Officer (the “Retention Agreements”).
`
`The Retention Agreements provide that Acasti will pay Ms. D’Alvise an
`employment retention incentive of $100,000 provided that she remains employed
`with Acasti until the earlier of April 30, 2021 or the closing of a merger or like
`transaction with a third party. As per the terms of the Retention Agreements, this
`amount was paid on May 6, 2021. Mr. Lemieux was also awarded a $25,000
`retention bonus which was paid on May 6, 2021.
`
`In addition, the Retention Agreements also provide that Acasti will pay each
`of Ms. D’Alvise and Mr. Lemieux an amount of up to $125,000 in the event that
`certain milestones are met, including the closing of a merger or like transaction with
`a third party. A minimum amount of $75,000 is also payable by Acasti to each of
`Ms. D’Alvise and Mr. Lemieux in the event of the termination of their employment
`without cause prior to the achievement of such milestones.
`
`The Prospectus, however, fails to adequately disclose the details of all employment-
`
`43.
`
`related and compensation-related discussions and negotiations concerning the Company’s officers
`
`and directors, including the parties to such communications, when they occurred, and the specific
`
`12
`
`
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`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 13 of 17 PageID #: 13
`
`content discussed/communicated.
`
`44.
`
`Any communications
`
`regarding post-transaction employment during
`
`the
`
`negotiation of the underlying transaction must be disclosed to shareholders. This information is
`
`necessary for shareholders to understand potential conflicts of interest of management and the
`
`Board. Such information may illuminate the motivations that would prevent fiduciaries from acting
`
`solely in the best interests of the Company’s shareholders.
`
`45.
`
`The above-referenced omitted information, if disclosed, would significantly alter
`
`the total mix of information available to the Company’s shareholders.
`
`COUNT I
`For Violations of Section 14(a) and Rule 14a-9 Promulgated Thereunder
`Against All Defendants
`Plaintiff repeats and realleges each and every allegation contained above as if fully
`
`46.
`
`set forth herein.
`
`47.
`
`During the relevant period, Defendants, individually and in concert, directly or
`
`indirectly, disseminated or approved the false and misleading Prospectus specified above, which
`
`failed to disclose material facts necessary in order to make the statements made, in light of the
`
`circumstances under which they were made, not misleading, in violation of Section 14(a) of the
`
`Exchange Act and Rule 14a-9 promulgated thereunder by the SEC.
`
`48.
`
`Each of the Individual Defendants, by virtue of his/her positions within the
`
`Company as officers and/or directors, were aware of the omitted information but failed to disclose
`
`such information, in violation of Section 14(a) of the Exchange Act. Defendants, by use of the
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`mails and means and instrumentalities of interstate commerce, solicited and/or permitted the use
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`of their names to file and disseminate the Prospectus with respect to the Proposed Transaction.
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`The Defendants were, at minimum, negligent in filing the materially false and misleading
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`Prospectus.
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`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 14 of 17 PageID #: 14
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`49.
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`The false and misleading statements and omissions in the Prospectus are material
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`in that a reasonable shareholder would consider them important in deciding how to vote on the
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`Proposed Transaction.
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`50.
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`By reason of the foregoing, Defendants have violated Section 14(a) of the Exchange
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`Act and Rule 14a-9 promulgated thereunder.
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`51.
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`Because of the false and misleading statements and omissions in the Prospectus,
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`Plaintiff is threatened with irreparable harm.
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`COUNT II
`Violations of Section 20(a) of the Exchange Act
`Against the Individual Defendants
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`Plaintiff repeats and realleges each and every allegation contained in the foregoing
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`52.
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`paragraphs as if fully set forth herein.
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`53.
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`The Individual Defendants acted as control persons of the Company within the
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`meaning of Section 20(a) of the Exchange Act as alleged herein. By virtue of their senior positions
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`as officers and/or directors of the Company and participation in and/or awareness of the
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`Company’s operations and/or intimate knowledge of the false statements contained in the
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`Prospectus filed with the SEC, they had the power to and did influence and control, directly or
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`indirectly, the decision-making of the Company, including the content and dissemination of the
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`false and misleading Prospectus.
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`54.
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`Each of the Individual Defendants was provided with or had unlimited access to
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`copies of the Prospectus and other statements alleged by Plaintiff to be misleading prior to and/or
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`shortly after these statements were issued and had the ability to prevent the issuance of the
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`statements or cause the statements to be corrected. As officers and/or directors of a publicly owned
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`company, the Individual Defendants had a duty to disseminate accurate and truthful information
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`14
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`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 15 of 17 PageID #: 15
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`with respect to the Prospectus, and to correct promptly any public statements issued by the
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`Company which were or had become materially false or misleading.
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`55.
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`In particular, each of the Individual Defendants had direct and supervisory
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`involvement in the operations of the Company, and, therefore, is presumed to have had the power
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`to control or influence the particular transactions giving rise to the securities violations as alleged
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`herein, and exercised the same. The Individual Defendants were provided with or had unlimited
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`access to copies of the Prospectus and had the ability to prevent the issuance of the statements or
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`to cause the statements to be corrected. The Prospectus at issue contains the recommendation of
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`the Individual Defendants to approve the Proposed Transaction. Thus, the Individual Defendants
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`were directly involved in the making of the Prospectus.
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`56.
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`In addition, as the Prospectus sets forth at length, and as described herein, the
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`Individual Defendants were involved in negotiating, reviewing, and approving the Proposed
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`Transaction. The Prospectus purports to describe the various issues and information that they
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`reviewed and considered—descriptions which had input from the Individual Defendants.
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`57.
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`By virtue of the foregoing, the Individual Defendants have violated Section 20(a)
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`of the Exchange Act.
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`58.
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`As set forth above, the Individual Defendants had the ability to exercise control
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`over and did control a person or persons who have each violated Section 14(a) and Rule 14a-9
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`promulgated thereunder, by their acts and omissions as alleged herein. By virtue of their positions
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`as controlling persons, the Individual Defendants are liable pursuant to Section 20(a) of the
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`Exchange Act. As a direct and proximate result of Defendants’ conduct, the Company’s
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`shareholders will be irreparably harmed.
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`Case 1:21-cv-04151-ENV-RML Document 1 Filed 07/23/21 Page 16 of 17 PageID #: 16
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`PRAYER FOR RELIEF
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`WHEREFORE, Plaintiff prays for judgment and relief as follows:
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`A.
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`Preliminarily and permanently enjoining Defendants and all persons acting in
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`concert with them from proceeding with, consummating, or closing the Proposed Transaction and
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`any vote on the Proposed Transaction, unless and until Defendants disclose and disseminate the
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`material information identified above to Company shareholders;
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`B.
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`In the event Defendants consummate the Proposed Transaction, rescinding it and
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`setting it aside or awarding rescissory damages;
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`C.
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`Declaring that Defendants violated Sections 14(a) and 20(a) of the Exchange Act,
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`and Rule 14a-9 promulgated thereunder;
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`D.
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`Awarding Plaintiff reasonable costs and expenses incurred in this action, including
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`counsel fees and expert fees; and
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`E.
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`Granting such other and further relief as the Court may deem just and proper.
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`JURY TRIAL DEMANDED
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`Plaintiff hereby demands a trial by jury.
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`Dated: July 23, 2021