Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 1 of 21
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`DANIEL BRADY,
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`
`
`-against-
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`
`Plaintiff,
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`Case No.: ______________
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`COMPLAINT
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`DEMAND FOR JURY TRIAL
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`
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`GW PHARMACEUTICALS, PLC,
`GEOFFREY GUY, JUSTIN GOVER, CABOT
`BROWN, DAVID GRYSKA, CATHERINE
`MACKEY, JAMES NOBLE, ALICIA
`SECOR, and LORD WILLIAM
`WALDEGRAVE,
`
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`Defendants.
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`
`
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`Plaintiff Daniel Brady (“Plaintiff”), by and through his attorneys, alleges the following
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`upon information and belief, including investigation of counsel and review of publicly available
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`information, except as to those allegations pertaining to Plaintiff, which are alleged upon personal
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`knowledge:
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`NATURE OF THE ACTION
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`1.
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`This is an action brought by Plaintiff against GW Pharmaceuticals, PLC (“GW” or
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`the “Company”) and the members of the Company’s board of directors (collectively referred to as
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`the “Board” or the “Individual Defendants” and, together with GW, the “Defendants”) for their
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`violations of Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 (“Exchange Act”),
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`15 U.S.C. §§ 78n(a), 78t(a) respectively, United States Securities and Exchange Commission
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`(“SEC”) Rule 14a-9, 17 C.F.R. § 240.14a-9. Plaintiff’s claims arise in connection with the
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`proposed acquisition of GW by Jazz Pharmaceuticals, PLC (“Jazz”) and its subsidiary, Jazz
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`Pharmaceuticals UK Holdings Limited (“BidCo”) (the “Proposed Merger”).
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`2.
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`On February 3, 2021, GW entered into an agreement and plan of merger by and
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 2 of 21
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`among (i) the Company, (ii) Jazz, and (iii) BidCo (the “Merger Agreement”), pursuant to which
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`the holders of GW ordinary shares will receive $16.662/3 in cash plus an amount of Jazz ordinary
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`shares equal to an exchange ratio that will be calculated based upon Jazz’s share price, and holders
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`of American Depositary Shares of GW (“GW ADSs”) will receive approximately $200 per share
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`in cash and $20 in Jazz stock in consideration for their shares (the “Merger Consideration”).
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`3.
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`In order to convince GW’s shareholders to vote for the Proposed Merger, on March
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`15, 2021, the Board authorized the filing of a materially incomplete and misleading Schedule 14A
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`Proxy Statement (the “Proxy”) with the SEC. In particular, the Proxy contains materially
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`incomplete and misleading information concerning: (i) the Company’s financial projections; (ii)
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`the fairness opinion and financial analyses performed by the Company’s financial advisors,
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`Goldman Sachs & Co. LLC (“Goldman Sachs”) and Centerview Partners LLC (“Centerview” and
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`together with Goldman Sachs, the “Financial Advisors”); and (iii) the interests of the Individual
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`Defendants in the Proposed Merger and steps taken to isolate those potential conflicts.
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`4.
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`Disclosure of this information is critical, as the shareholder vote is scheduled to
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`occur on April 23, 2021 (the “Shareholder Vote”) and the Proposed Merger is expected to close in
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`the second quarter of 2021. It is imperative that the material information that has been omitted
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`from the Proxy be disclosed to the Company’s stockholders prior to the Shareholder Vote so they
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`can properly determine whether to vote for or against the Proposed Merger.
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`5.
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`For these reasons, and as set forth in detail herein, Plaintiff asserts claims against
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`Defendants for violations of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9.
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`Plaintiff seeks to enjoin Defendants from taking any steps to consummate the Proposed Merger
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`unless and until the material information discussed below is disclosed to GW’s stockholders
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`sufficiently in advance of the upcoming Shareholder Votes or, in the event the Proposed Merger
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 3 of 21
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`is consummated, to recover damages resulting from the Defendants’ misconduct.
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`JURISDICTION AND VENUE
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`6.
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`This Court has original jurisdiction over this action pursuant to Section 27 of the
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`Exchange Act (15 U.S.C. § 78aa) and 28 U.S.C. § 1331 (federal question jurisdiction) as Plaintiff
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`alleges violations of Sections 14(a) and 20(a) of the Exchange Act.
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`7.
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`Personal jurisdiction exists over each Defendant either because the Defendant
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`conducts business in or maintains operations in this District or is an individual who is either
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`present in this District for jurisdictional purposes or has sufficient minimum contacts with this
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`District as to render the exercise of jurisdiction over the Defendants by this Court permissible
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`under traditional notions of fair play and substantial justice. “Where a federal statute such as
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`Section 27 of the [Exchange] Act confers nationwide service of process, the question becomes
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`whether the party has sufficient contacts with the United States, not any particular state.” Sec.
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`Inv’r Prot. Corp. v. Vigman, 764 F.2d 1309, 1305 (9th Cir. 1985). “[S]o long as a defendant has
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`minimum contacts with the United States, Section of the Act confers personal jurisdiction over
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`the defendant in any federal district court.” Id. at 1316. Indeed, GW maintains substantial
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`operations through its subsidiary Greenwich Biosciences, Inc., which is headquartered in the
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`United States.
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`8.
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`Venue is proper in this District under Section 27 of the Exchange Act and 28
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`U.S.C. § 1391, because Defendants are found or are inhabitants or transact business in this
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`District. GW ADSs trade on the Nasdaq stock exchange, which is headquartered in this District,
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`and the Company hired financial and legal advisors for the purposes of the Proposed Merger,
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`which are headquartered in this District, rendering venue in this District appropriate. See, e.g.,
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`United States v. Svoboda, 347 F.3d 471, 484 n.13 (2d Cir. 2003) (collecting cases).
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`9.
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`Plaintiff is, and has been continuously throughout all times relevant hereto, the
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`PARTIES
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`owner of GW ADSs.
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`10.
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`Defendant GW Pharmaceuticals, PLC is a company incorporated in the United
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`Kingdom and which maintains its principal executive offices at Sovereign House, Vision Park,
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`Chivers Way, Histon, Cambridge CB24 9BZ, United Kingdom. The Company’s ADSs trade on
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`the Nasdaq under the ticker symbol “GWPH”.
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`11.
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`Individual Defendant Geoffrey Guy is, and at all relevant times has been, the
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`founder of the Company and Chairman of the Board.
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`12.
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`Individual Defendant Justin Gover (“Gover”) is, and at all relevant times has been,
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`the Chief Executive Officer and Executive Director of the Company.
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`13.
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`Individual Defendant Cabot Brown is, and at all relevant times has been, a non-
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`executive director of the Company.
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`14.
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`Individual Defendant David Gryska is, and at all relevant times has been, a non-
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`executive director of the Company.
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`15.
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`Individual Defendant Catherine Mackey is, and at all relevant times has been, a
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`non-executive director of the Company.
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`16.
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`Individual Defendant James Noble is, and at all relevant times has been, the Lead
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`Independent Director and Deputy Chairman of the Company.
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`17.
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`Individual Defendant Alicia Secor is, and at all relevant times has been, a non-
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`executive director of the Company.
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`18.
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`Individual Defendant Lord William Waldegrave is, and at all relevant times has
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`been, a non-executive director of the Company.
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 5 of 21
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`19.
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`The defendants referred to in ¶¶11-18 are collectively referred to herein as the
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`“Individual Defendants” or the “Board” and, together with GW, as the “Defendants.”
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`SUBSTANTIVE ALLEGATIONS
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`A.
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`Background of the Proposed Merger
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`20.
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`GW, a public limited company incorporated in England and Wales, discovers,
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`develops, manufactures, and commercializes novel, regulatory approved therapeutics from its
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`proprietary cannabinoid product platform to address a broad range of diseases.
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`21.
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`Jazz, a public limited company incorporated in the Republic of Ireland, is a global
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`biopharmaceutical company dedicated to developing and commercializing life-changing
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`medicines, with a focus in neuroscience, including sleep and movement disorders, and in oncology,
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`including hematologic malignancies and solid tumors. Jazz ordinary shares are listed on Nasdaq
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`under the symbol “JAZZ”.
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`22.
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`On February 3, 2021, GW authorized the issuance of a press release announcing
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`the Proposed Merger, which states in relevant part:
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`Jazz Pharmaceuticals to Acquire GW Pharmaceuticals plc, Creating an
`Innovative, High-Growth, Global Biopharma Leader
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`DUBLIN and LONDON, Feb. 3, 2021 /PRNewswire/ -- Jazz Pharmaceuticals plc
`(Nasdaq: JAZZ) and GW Pharmaceuticals plc (Nasdaq: GWPH) today announced
`the companies have entered into a definitive agreement for Jazz to acquire GW for
`$220.00 per American Depositary Share (ADS), in the form of $200.00 in cash and
`$20.00 in Jazz ordinary shares, for a total consideration of $7.2 billion, or $6.7
`billion net of GW cash. The transaction, which has been unanimously approved by
`the Boards of Directors of both companies, is expected to close in the second
`quarter of 2021.
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`Upon close of the transaction, the combined company will be a leader in
`neuroscience with a global commercial and operational footprint well positioned to
`maximize the value of its diversified portfolio.
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`in discovering, developing, manufacturing and
`leader
`is a global
`GW
`commercializing novel, regulatory approved therapeutics from its proprietary
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 6 of 21
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`cannabinoid product platform to address a broad range of diseases. The company's
`lead product, Epidiolex® (cannabidiol) oral solution, is approved in patients one-
`year and older for the treatment of seizures associated with Lennox-Gastaut
`Syndrome (LGS), Dravet Syndrome and Tuberous Sclerosis Complex (TSC), all of
`which are rare diseases characterized by severe early-onset epilepsy. Epidiolex was
`the first plant-derived cannabinoid medicine ever approved by the U.S. Food and
`Drug Administration (FDA). This product has also been approved, under the
`tradename Epidyolex®, by the European Medicines Agency (EMA) in patients two
`years of age and older for the adjunctive treatment of seizures associated with LGS
`and Dravet syndrome in conjunction with clobazam and is under EMA review for
`the treatment of seizures associated with TSC. In addition to the approved
`indications for Epidiolex, there are considerable opportunities to pursue other
`indications within the epilepsy field, including other treatment-resistant epilepsies
`where significant unmet needs of patients exist.
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`Beyond Epidiolex, GW has a scientific platform and deep innovative pipeline of
`cannabinoid product candidates, as well as highly specialized manufacturing
`expertise, developed over two decades of pioneering and building leadership in
`cannabinoid science. This pipeline includes nabiximols, for which the company is
`in Phase 3 trials to seek FDA approval for treatment of spasticity associated with
`multiple sclerosis and spinal cord injury, as well as earlier-stage cannabinoid
`product candidates for autism and schizophrenia.
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`"Jazz is proud of our leadership position in sleep medicines and rapidly growing
`oncology business. We are excited to add GW's industry-leading cannabinoid
`platform, innovative pipeline and products, which will strengthen and broaden our
`neuroscience portfolio, further diversify our revenue and drive sustainable, long-
`term value creation opportunities," said Bruce Cozadd, chairman and CEO of Jazz
`Pharmaceuticals. "We are joining two teams that share a passion for, and track
`record of, developing differentiated therapies that advance science and transform
`the lives of patients. This will help facilitate a successful integration and bring
`added capabilities to Jazz. Given the strength of our balance sheet and the
`meaningful financial drivers of the transaction, we are confident in the value we
`can deliver to both companies' shareholders and patients. We look forward to
`welcoming the GW team to Jazz to build an even stronger company."
`
`"Over the last two decades, GW has built an unparalleled global leadership position
`in cannabinoid science, including the successful launch of Epidiolex, a
`breakthrough product within the field of epilepsy, and a diverse and robust
`neuroscience pipeline. We believe that Jazz is an ideal growth partner that is
`committed to supporting our commercial efforts, as well as ongoing clinical and
`research programs," said Justin Gover, CEO of GW Pharmaceuticals. "We have a
`shared vision of developing and commercializing innovative medicines that address
`significant unmet needs in neuroscience and an approach of putting patients first.
`Together, we will have an opportunity to reach and impact more patients through a
`broader portfolio of neuroscience-focused therapies than ever before."
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 7 of 21
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`23.
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`The Merger Consideration does not compensate stockholders for the intrinsic value
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`of their shares. The Proposed Merger comes in the midst of the COVID-19 pandemic
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`(“Pandemic”), at a time when stocks throughout the world are subject to great uncertainty and
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`radical change. Piggybacking off the Pandemic, the Proposed Merger provides a substantial
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`discount to Jazz, at the expense of the common stockholders who will not see the intrinsic value
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`of their shares realized nor be able to fully partake in the continued growth of the Company.
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`Therefore, it is imperative that stockholders receive the material information (discussed in detail
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`below) that Defendants have omitted from the Proxy, which is necessary for stockholders to
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`properly determine how to vote their shares.
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`B.
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`The Misleading Proxy Omits Material Information
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`24.
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`On March 15, 2021, Defendants filed the materially incomplete and misleading
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`Proxy with the SEC. The Individual Defendants were obligated to carefully review the Proxy
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`before it was filed with the SEC and disseminated to the Company’s shareholders to ensure that it
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`did not contain any material misrepresentations or omissions. However, the Proxy misrepresents
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`or omits material information concerning the Company’s financial projections, the interests of the
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`Individual Defendants in the Proposed Merger, and the Financial Advisors’ analyses. This
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`information is necessary for GW’s stockholders to make an informed decision on how to vote their
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`shares, in violation of Sections 14(a) and 20(a) of the Exchange Act, and SEC Rule 14a-9.
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`I.
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`The Company’s Financial Projections
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`25.
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`First, the Proxy fails to adequately disclose the financial projections prepared by
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`the Company’s management. Instead, it provides the following select snippets of certain metrics:
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`July Forecasts of GW Management
`($ in millions)
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 8 of 21
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`Fiscal Year Ending December 31,
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` 2020 E 2021 E 2022 E 2023 E 2024 E 2025 E 2026 E 2027 E 2028 E 2029 E 2030 E 2031 E 2032 E 2033 E 2034 E 2035 E
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`
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`Total
`Revenue(1) $ 538 $ 778 $ 1,112 $ 1,597 $ 2,042 $ 2,442 $ 2,736 $ 2,944 $ 3,065 $ 3,236 $ 3,425 $ 2,358 $ 2,483 $ 2,617 $ 2,246 $2,284
`EBIT(2)
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` $ (65 ) $ 29 $ 236 $ 570 $ 874 $ 1,146 $ 1,359 $ 1,497 $ 1,632 $ 1,765 $ 1,902 $ 1,221 $ 1,371 $ 1,494 $ 1,278 $1,293
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`December Forecasts of GW Management
`($ in millions)
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`
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`Fiscal Year Ending December 31,
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` 2021 E 2022 E 2023 E 2024 E 2025 E 2026 E 2027 E 2028 E 2029 E 2030 E 2031 E 2032 E 2033 E 2034 E 2035 E
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` $ 742 $ 1,084 $ 1,518 $ 1,943 $ 2,326 $ 2,456 $ 2,572 $ 2,664 $ 2,779 $ 2,906 $ 1,824 $ 1,897 $ 1,939 $ 1,455 $ 1,413
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` $ 680 $ 965 $ 1,356 $ 1,738 $ 2,083 $ 2,195 $ 2,297 $ 2,378 $ 2,480 $ 2,592 $ 1,618 $ 1,682 $ 1,719 $ 1,284 $ 1,246
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` $ 12 $ 221 $ 530 $ 822 $ 1,081 $ 1,210 $ 1,292 $ 1,399 $ 1,500 $ 1,605 $ 906 $ 1,014 $ 1,067 $ 779 $ 743
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`
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` $ 12 $ 221 $ 530 $ 857 $ 1,155 $ 1,303 $ 1,471 $ 1,619 $ 1,745 $ 1,882 $ 1,108 $ 1,164 $ 1,200 $ 849 $ 808
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`
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`
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`Total Revenue(1)
`Gross Profit
`EBIT(2)
`EBIT (Excl.
`Unallocated
`R&D)(3)
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`26.
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`If a Proxy discloses financial projections and valuation information, such
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`projections must be complete and accurate. The question here is not the duty to speak, but liability
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`for not having spoken enough. With regard to future events, uncertain figures, and other so-called
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`soft information, a company may choose silence or speech elaborated by the factual basis as then
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`known—but it may not choose half-truths. Accordingly, to the extent that this information is
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`readily available, Defendants must disclose: (i) Stock-based Compensation; (ii) Net Debt; (iii)
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`Net Income/Loss; and (v) Dividends. Failure to do so will result in shareholders not having all
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`material information available and, should the merger be consummated, will cause shareholders
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`to lose the intrinsic value of their shares.
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`27.
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`Second, the Proxy fails to provide full disclosure regarding the reasons that led
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`management to significantly reduce their projections. As outlined in the Proxy and noted above,
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`management created two sets of projections: the July Forecasts and the significantly reduced
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`December Forecasts. The reductions in the December Forecasts appear to be contrary to GW’s
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`experienced growth between the creation of the July Forecasts and December Forecasts. Indeed,
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`as stated in their Q3 2020 Earnings Call Transcript on November 3, 2020:
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 9 of 21
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`
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`Overall, I’m very pleased to report a strong quarter with total revenue in Q3 of $137
`million, the sequential growth the 13% over the prior quarter and 51% over the
`prior year quarter. Year-to-date, total revenue is $379 million, representing 87%
`growth over the prior year.
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`While the pandemic makes for more challenging commercial backdrop, we are
`confident that Epidiolex has all the characteristics to continue to exhibit strong
`growth in the months and years to come.
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`Yet despite this improvement, EBIT for the December Forecasts is roughly 12.5% lower on
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`average for each metric than the July Forecasts.
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`28.
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`Though Defendants disclose certain assumptions underlying the preparation of the
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`December Forecasts, many of these assumptions vaguely identify the removal of certain ailments
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`as target indications for certain of the Company’s products and/or product candidates without
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`quantifying the impact these assumptions had on the Company’s projections. By way of example,
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`the Proxy indicates that the December Forecasts reflect:
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`
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`However, the forecasts provided in the Proxy do not delineate the underlying financial line items
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`relating to each product candidate and/or ailment or the impact (percentage or otherwise) the
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`removal of the ailments has on the Company’s financial forecasts. Without this information
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`shareholders are unable to determine whether the December Forecasts (and the reductions therein)
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`are reasonable in light of the Company’s demonstrated growth during the period preceding their
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`preparation.
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`II.
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`The Financial Advisors’ Analyses
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`29.
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`The Proxy describes the Financial Advisors’ fairness opinions and valuation
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 10 of 21
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`analyses performed in support of their opinions, yet omits critical information. Defendants concede
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`the materiality of this information in citing the Financial Advisors’ fairness opinions and their
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`valuation analyses among the reasons for recommending the Proposed Merger to GW
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`shareholders. However, the summaries of the fairness opinions and analyses provided in the Proxy
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`fail to include key inputs and assumptions. Without this information, as described below, GW’s
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`shareholders are unable to fully understand the analyses and, thus, are unable to determine what
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`weight, if any, to place on the Financial Advisors’ fairness opinions in deciding whether to vote in
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`favor of the Proposed Merger. The following omitted information, if disclosed, would significantly
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`alter the total mix of information available to GW’s shareholders.
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`30.
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`For example, and third, in summarizing Centerviews’ Selected Public Company
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`Analysis, Defendants must disclose all of the inputs of the individual companies and metrics
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`observed by Centerview. Without providing this information stockholders are unable to assess
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`whether the companies selected by Centerview were reasonable.
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`31.
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`Fourth, with respect to Centerviews’ Selected Transactions Analysis, Defendants
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`must disclose all of the metrics observed and the individual premiums paid for each of the
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`transactions observed.
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`32.
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`Fifth, with respect to Centerviews’ Discounted Cash Flow Analysis (“DCF”), the
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`Proxy fails to disclose: (i) the terminal value for the Company; (ii) the basis for assuming that
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`unlevered free cash flows would decline in perpetuity after December 31, 2035 at a range of rates
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`of free cash flow decline of 10% to 40% year over year; (iii) the basis for applying the discount
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`rate range of 9.5% to 11.5%; and (iv) all other company specific inputs such as the Company’s
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`target capital structure weightings, the cost of long-term debt, after-tax yield on permanent excess
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`cash, if any, future applicable marginal cash tax rate and beta.
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 11 of 21
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`33.
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`Sixth, with respect to Goldman Sachs’ Illustrative Discounted Cash Flow Analysis,
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`the Proxy fails to disclose: (i) the Company’s weighted average cost of capital; (ii) the terminal
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`value; (iii) the basis for applying perpetuity growth rates ranging from 0.0% to 2.0%; (iv) the basis
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`for utilizing the capital asset pricing model method; (iv) the basis for selecting a discount rate of
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`9.5% to 11.5%; and (v) all other company specific inputs including the company’s target capital
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`structure weightings, the cost of long-term debt, after-tax yield on permanent excess cash, if any,
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`future applicable marginal cash tax rate and a beta for the company.
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`34.
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`Seventh, with respect to Goldman Sachs’ Premia Analysis, Defendants must
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`disclose the metrics observed and the individual premiums paid for each of the transactions
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`observed.
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`35.
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`These key inputs are material to GW shareholders, and their omission renders the
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`summary of the fairness opinions incomplete and misleading. As a highly-respected professor
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`explained in one of the most thorough law review articles explaining the fundamental flaws with
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`the valuation analyses bankers perform in support of fairness opinions: in a discounted cash flow
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`analysis a banker takes management’s forecasts, and then makes several key choices “each of
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`which can significantly affect the final valuation.” Steven M. Davidoff, Fairness Opinions, 55
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`Am. U.L. Rev. 1557, 1576 (2006). Such choices include “the appropriate discount rate, and the
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`terminal value…” Id. As Professor Davidoff explains:
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`There is substantial leeway to determine each of these, and any change can
`markedly affect the discounted cash flow value. For example, a change in the
`discount rate by one percent on a stream of cash flows in the billions of dollars can
`change the discounted cash flow value by tens if not hundreds of millions of
`dollars….This issue arises not only with a discounted cash flow analysis, but with
`each of the other valuation techniques. This dazzling variability makes it difficult
`to rely, compare, or analyze the valuations underlying a fairness opinion unless full
`disclosure is made of the various inputs in the valuation process, the weight
`assigned for each, and the rationale underlying these choices. The substantial
`discretion and lack of guidelines and standards also makes the process vulnerable
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 12 of 21
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`to manipulation to arrive at the “right” answer for fairness. This raises a further
`dilemma in light of the conflicted nature of the investment banks who often provide
`these opinions.
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`Id. at 1577-78 (emphasis added). Without the above material information, GW shareholders cannot
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`evaluate for themselves the reliability of the Financial Advisors’ fairness opinions, make a
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`meaningful determination of whether the implied equity value per share range reflects the true
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`value of the Company or was the result of the Financial Advisors’ unreasonable judgment, and
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`make an informed decision regarding whether to vote in favor of the Proposed Merger.
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`III.
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`Potential Conflicts of Interest
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`36.
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`Eighth, and importantly, the Proxy omits material information relating to potential
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`conflicts of interest faced by the Board and/or the Company’s management in their pursuit and
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`negotiation of the Proposed Merger. Specifically, the Proxy must disclose additional information
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`relating to the Board’s decision to engage “Radford, the independent compensation consultant of
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`the Remuneration Committee of the GW Board (the ‘Remuneration Committee’)” and the
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`subsequent changes made to the Company’s severance program, as recommended by Radford.
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`37. More specifically, the Proxy indicates that Jazz made an unsolicited non-binding
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`proposal to acquire the Company on July 8, 2020, which was rejected by the Board on or about
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`July 17, 2020. Less than one month later, on August 13, 2020, Jazz transmitted a revised non-
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`binding proposal to acquire the Company, which the Board again rejected. On September 11, 2020,
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`Jazz reiterated its revised proposal of August 13, 2020, and indicated that it was willing to consider
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`an increase in its proposal if GW would permit Jazz to conduct limited due diligence. Although
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`the Board again rejected this proposal on September 17, 2020, privately it became interested in
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`exploring a sale and engaged the Financial Advisors following Jazz’s August 13, 2020 proposal.
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`38.
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`Then, having apparently decided to pursue a potential sale, “[i]n October 2020, GW
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 13 of 21
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`engaged Radford, the independent compensation consultant of the Remuneration Committee…to
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`review GW’s severance plans and programs, relating to both change in control and non-change
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`in control scenarios, and to make recommendations regarding potential changes to those plans and
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`programs to resolve certain internal and geographical inconsistencies and to bring these plans and
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`programs in line with current market practices for peer companies.” Thereafter, as negotiations
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`with Jazz intensified, Radford made certain recommendations, which the Renumeration
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`Committee discussed and ultimately adopted, including regarding (1) GW entering into a new
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`employment agreement with Gover (the CEO who conducted negotiations with Jazz) and (2)
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`changes to GW’s severance plans and programs “to resolve certain internal and geographical
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`inconsistencies and to bring these plans and programs in line with current market practices for peer
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`companies.” Indeed, on January 25, 2021, as negotiations reached finality, the Reunumeration
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`Committee specifically identified “the adoption of a company-wide severance program as had
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`been recommended by Radford and discussed at previous meetings, matters relating to GW’s
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`incentive programs and other employee benefits matters” as “relating to the proposed transaction
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`with Jazz” and “authorized senior management…to discuss and negotiate these matters with Jazz
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`and its representatives.” Thereafter, Gover and others negotiated these matters from January 26
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`through February 2, during which Jazz requested that members of GW management remain with
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`the combined company after the completion of the transaction, some on a transitional basis and
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`some on a more long-term basis, with Gover remaining for a transitional period.
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`39.
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`On February 2, 2021, during the same meeting at which they approved the Merger
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`Agreement, the Board’s counsel reviewed the employee compensation and benefits related matters
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`that had previously been discussed, including GW’s ability to implement a company-wide
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`severance program as recommended by Radford and as previously discussed, the timing of GW’s
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 14 of 21
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`2021 long-term incentive grants and the treatment of incentive awards and other employee benefit
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`programs in the transaction, as well as certain contractual provisions and incentives that had been
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`negotiated with Jazz so that the senior management team would remain with the combined
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`company for a period deemed critical to the integration, with the members of the Remuneration
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`Committee confirming that the resolution of these matters and negotiated contractual provisions
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`and incentives were consistent with the terms they had discussed.
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`40.
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`The following day the parties executed the Merger Agreement. Then, later in
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`February 2021, the Board adopted the Greenwich Biosciences Amended and Restated Change in
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`Control and Severance Benefit Plan (the “U.S. Severance Plan”) and the GW Change in Control
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`and Severance Benefit Plan (the “UK Severance Plan,” and together with the U.S. Severance Plan,
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`the “GW Severance Plans”).
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`41.
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`Although the proxy indicates that “[t]he determination to engage Radford for this
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`matter was not made in contemplation of any particular transaction, whether with Jazz or any other
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`party,” the timing of this engagement and these changes cannot be ignored and demand further
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`disclosure. Specifically, the Proxy must disclose additional information regarding (A) the genesis
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`of the Company’s deliberations and review concerning the Company’s severance plans and
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`benefits and/or the decision to engage a third-party consultant to advise on severance-related
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`matters and (B) the timing and/or substance of the Board’s discussions, deliberations, and/or
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`decision(s) concerning (i) the Company’s prior severance plan(s) and programs, the
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`inconsistencies therein, and the participants in such plan(s), and (ii) whether and when the
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`Company would engage a third-party consultant.
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`42.
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`The Proxy further fails to disclose to the Company’s shareholders the specific
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`changes effected by the adoption of the GW Severance Plans compared to the prior version(s) of
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`Case 1:21-cv-02382 Document 1 Filed 03/18/21 Page 15 of 21
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`the plans. Indeed, based on a review of the Company’s publicly disclosed filings, several executive
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`officers previously executed “Participation Agreements” detailing their eligibility to participate in
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`the original Greenwich Biosciences, Inc. Change in Control and Severance Benefit Plan. It does
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`not appear that Individual Defendant Gover executed a Participation Agreement, and it is therefore
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`unclear what severance benefits, if any, Gover was entitled to under a change-in-control scenario
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`before the new GW Severance Plans became effective in February 2021. It also appears that, as a
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`result of the new GW Severance Plans, the Participation Agreements have been amended to
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`provide additional severance benefits in the event of a change-in-control transaction, and for a
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`tiered system of benefits, with Gover classified as “Tier 1” and receiving more benefits than other
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`GW executive officers. According to the Proxy, as a result of the Proposed Merger, Individual
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`Defendant Gover may receive as much as $39 million in golden parachute compensation, and
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`shareholders are entitled to know how much of that compensation is a result of the new GW
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`Severance Plans.
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`43.
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`Simply put, considering the timing of the engagement of Radford in the middle of
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`the process that culminated in the Proposed Merger and the resultant amen