The terms related to interest, security, payments, conversion (including the conversion rate), rights of RBH upon a Fundamental Change (as defined in the Subsequently Purchased Convertible Notes) and affirmative and negative covenants are the same as described under the heading “Convertible Notes Issuance” in the Company’s Current Report on Form 8-K filed with the SEC on November 24, 2023 (the “November 8-K”). RBH has agreed that the transactions currently contemplated by the Merger Agreement, including any filings required by RBH as a result of the Subsequent Financing, or any other person or persons with the SEC in connection with the Merger Agreement will not constitute a Fundamental Change (as defined in the Convertible Notes).
The Subsequently Purchased Convertible Notes were not issued pursuant to an indenture. Unless the Company obtains the Requisite Stockholder Approvals (as defined in the Purchase Agreement), the Company will be prohibited from issuing any shares of Class A Common Stock upon conversion of the Subsequently Purchased Convertible Notes if the issuance of such shares of Class A Common Stock, together with shares issued upon the conversion of any other Convertible Notes and exercise of any Warrants (as defined in the Purchase Agreement), would exceed 19.99% of the Company’s outstanding shares of Class A Common Stock as of the date of the Purchase Agreement or otherwise exceed the aggregate number of shares of Class A Common Stock which the Company may issue without breaching the Company’s obligations under the Nasdaq listing rules.
The Subsequent Financing is connected to the Company’s announcements in its November 8-K, its Current Report on Form 8-K, filed with the SEC on January 25, 2024 (the “January 8-K”), its Current Report on Form 8-K, filed with the SEC on March 1, 2024 (the “First March 8-K”), its Second March 8-K, and its Current Report on Form 8-K, filed with the SEC on March 21, 2024 (the “Third March 8-K”) of a series of closings of previous financing transactions (the “Prior Financings”) with RBH, JMCM Holdings LLC (“JMCM”), MH Orbit LLC (“MH Orbit”), SherpaVentures Fund II, LP (“ACME Fund II”), Chris Kemp, the Company’s chief executive officer, chairman and a director, through the Chris Kemp Living Trust dated February 10, 2023 (the “Kemp Trust”), Adam London, the Company’s chief technology officer and a director (“Dr. London”), Astera Institute (“Astera”), ERAS Capital, LLC (“ERAS”) and Ulrich Gall (“Gall” and together with JMCM, MH Orbit, ACME Fund II, the Kemp Trust, Dr. London, Astera, and ERAS, collectively, the “Initial Investors” and together with RBH, collectively, the “Investors”), pursuant to which the Company issued to the Investors senior secured convertible notes (the “Existing Issued Convertible Notes”) substantially in the form of Senior Secured Convertible Note due 2025 filed as Exhibit 4.1 to the First March 8-K, and warrants in accordance with the form of the Common Stock Purchase Warrant filed as Exhibit 4.2 to the November 8-K (the “Existing Issued Warrants” and together with the Subsequently Purchased Warrants, collectively, the “Warrants”). Such Prior Financings are discussed in the November 8-K, the January 8-K, the First March 8-K, the Second March 8-K, and the Third March 8-K.
The foregoing summary of the Subsequently Purchased Convertible Notes does not purport to be complete and is qualified in its entirety by reference to the form of Senior Secured Convertible Note that was filed as Exhibit 4.1 to the April 8-K.
No Registration; Registration Rights
The Subsequently Purchased Convertible Notes and the Underlying Shares have not been, and the Subsequently Purchased Convertible Notes will not be, registered under the Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any other jurisdiction. The Subsequently Purchased Convertible Notes and the Underlying Shares may not be offered or sold in the United States absent registration or an applicable exemption from registration under the Securities Act and any applicable state securities laws. The Subsequently Purchased Convertible Notes were offered and sold to RBH in a transaction exempt from registration under the Securities Act in reliance on Section 4(a)(2) thereof and Rule 506(b) of Regulation D thereunder. RBH is an “accredited investor,” as defined in Regulation D, and is acquiring the Subsequently Purchased Convertible Notes and any Underlying Shares for investment only and not with a view toward, or for resale in connection with, the public sale or distribution thereof.
Pursuant to the Purchase Agreement, the Company is required to file a registration statement with the SEC no later than August 1, 2024, to register the resale of all Underlying Shares.
