| The Common Shares were acquired by Maistros on February 19, 2025 pursuant to a Business Combination Agreement dated June 18, 2024 (as amended, the "Business Combination Agreement") by and among MGO Global Inc. ("MGO"), the Issuer, Heidmar Inc. ("HMI"), HMR Merger Sub Inc. ("Merger Sub"), Rhea and Maistros in a transaction set forth as follows: (1) Merger Sub, which was directly wholly owned by the Issuer, merged with and into MGO, as a result of which (i) the separate corporate existence of Merger Sub ceased and MGO continued as the surviving entity and a wholly owned direct subsidiary of the Issuer and (ii) each issued and outstanding share of MGO was no longer outstanding and was automatically cancelled, in exchange for the right of the holders of MGO to receive a certain number of Common Shares, and (2) the shareholders of HMI, including Maistros, transferred all of the outstanding shares of HMI to the Issuer, the consideration for which was the issuance of Common Shares, including those issued to Maistros. Maistros transferred 47,904 shares of HMI and received all 26,238,379 Common Shares of the Issuer in return as the consideration for transferring its shares in HMI.
Prior to the consummation of the transactions set forth above, the articles of incorporation and bylaws of the Issuer were amended. All of the transactions described in this Item 3 are collectively called the "Business Combination." The Business Combination was consummated on February 19, 2025.
Pursuant to the Business Combination Agreement, the Issuer will also issue to Maistros an additional 2,537,531 Shares (the "Earnout Shares") if the Issuer achieves any one of the following financial milestones during the 12 months ending December 31, 2025: (i) revenue that is equal to or more than $45.0 million, (ii) earnings before interest, taxes, depreciation and amortization, or EBITDA, equal to or more than $30.0 million, or (iii) net income equal to or more than $25.0 million, with each measure calculated using certain adjustments.
The foregoing description of the Business Combination Agreement is not complete and is qualified in its entirety to the full text of the Business Combination Agreement, a copy of which is filed as exhibits hereto.
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| The information set forth in Item 3 and Item 5 is hereby incorporated herein by reference.
Shareholders Agreement
Maistros, Rhea Marine Ltd. ("Rhea" and together with Maistros, the "Shareholders"), and the Issuer entered into that certain Shareholders Agreement dated February 19, 2025 (the "Shareholders Agreement"). The Shareholders Agreement and the Issuer's Amended and Restated Articles of Incorporation, provide that Maistros shall designate and nominate four of the seven nominees to the Issuer's board of directors (the "Board") (and any replacements thereto) until Maistros ceases to own at least 15% of the Issuer's issued and outstanding voting stock (the "Expiration Date"), and therefore may have influence over the corporate activities of the Issuer, including activities which may relate to items described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. Pursuant to the Shareholders Agreement and the Issuer's Amended and Restated Articles of Incorporation, until the Rhea ceases to own 15% of the Issuer's issued and outstanding voting stock, Rhea shall designate and nominate three nominees to the Board (and any replacements thereto).
The Shareholders Agreement contains a provision whereby, in connection with any annual or special meeting of shareholders of the Issuer at which (or in connection with any written consent pursuant to which) directors nominated by either Shareholder are to be voted upon for election, the Shareholders shall (even after the Expiration Date with respect to a Shareholder), and shall cause each of their respective controlled Affiliates (as defined therein) (i) unless otherwise agreed by all Shareholders, cause all of the voting shares beneficially owned by them to be present or represented by proxy at all such shareholder meetings for purposes of establishing a quorum and (ii) vote all such voting shares of in favor of any director nominee or director selected in accordance with the Shareholders Agreement by either Shareholder and against the removal of any director nominee or director selected in accordance with the Shareholders Agreement by either Shareholder (unless the removal of any director nominee or director was requested by the Shareholder that so nominated such director nominee or Shareholder-designated director, in which case all Shareholders shall and shall cause each of their respective controlled Affiliates to vote all voting shares of in favor of such removal). A majority of the individuals that each of Rhea and Maistros designate and nominate for appointment or election to the Board shall be non-U.S. persons to the extent the Board determines it is necessary in order to preserve the Issuer's status as a Foreign Private Issuer (as defined in Rule 405 of the Securities Act of 1933, as amended), and each of Maistros and Rhea shall nominate half of the Issuer's independent directors. Notwithstanding the foregoing, the nominating committee of the Board may reject any proposed director nominee if it determines that the proposed nominee would not qualify under any applicable law, rule or regulation to serve as a director or that the election or appointment of the proposed nominee would result in the loss of the Issuer's status as a Foreign Private Issuer. In that case, the relevant Shareholder may thereafter propose an alternative director nominee.
The Shareholders Agreement provides that if a Shareholder or its affiliate proposes to sell or transfer 3% or more of outstanding Common Shares to an unaffiliated third party, then the other Shareholder (so long as it and its affiliates own 10% of the outstanding common shares of the Issuer) shall have tag-along rights in such sale, subject to certain exceptions.
The Shareholders Agreement shall remain in effect until terminated (i) by the mutual written agreement of the Issuer and the Shareholders, and (ii) with respect to a particular Shareholder when it, together with its affiliates, no longer beneficially owns any voting stock of the Issuer (but shall not be automatically terminated with respect to the other Shareholder). Notwithstanding termination of the Shareholders Agreement, certain provisions shall survive as set forth therein.
The foregoing description of the Shareholders Agreement is not complete and is qualified in its entirety to the full text of the Shareholders Agreement, a copy of which is filed as an exhibit hereto.
Registration Rights Agreement
The Issuer, Maistros and Rhea entered into a Registration Rights Agreement (the "Registration Rights Agreement") on February 19, 2025 pursuant to which the Issuer granted Maistros and Rhea and their affiliates the right, under certain circumstances and subject to certain restrictions, to require the Issuer to register for resale under the Securities Act of 1933, the Common Shares held by them and certain other equity securities. Under the Registration Rights Agreement, these persons have the right, once the Issuer becomes eligible to file a registration statement on Form F-3 or Form S-3, to cause the Issuer to file a "shelf" registration statements permitting resales of these securities on a delayed or continuing basis. Maistros and Rhea have the right to demand that the Issuer conduct an underwritten offering or "shelf takedown" under these registration statements, subject to certain conditions. In addition, these persons will have the ability to exercise certain piggyback registration rights in connection with registered offerings requested by other shareholders or initiated by the Issuer, subject to certain requirements and customary conditions. The Registration Rights Agreement also provides that the Issuer will pay certain expenses relating to the registrations and indemnify Maistros and Rhea against certain liabilities. The foregoing description of the Registration Rights Agreement is not complete and is qualified in its entirety to the full text of the Registration Rights Agreement, a copy of which is filed as an exhibit hereto.
Lock-Up/Leak-Out Agreement
The Issuer and Maistros entered into a Lock-Up/Leak-Out Agreement dated February 19, 2025 (the "Lock Up Agreement") pursuant to which Maistros agreed (i) not to sell its Common Shares that it acquired as part of the Business Combination for 120 days after the closing of the Business Combination, subject to certain exceptions, and (ii) during the 60 days after such 120-day period, Maistros may sell into the open markets on any trading day, in the aggregate, no more than the product of (x) 10% of the trading volume of Common Shares on the prior trading day as reported by Bloomberg times (y) the ratio of the number of shares received by Maistros as of the closing date of the Merger, divided by the number of closing date securities for all parties that signed agreements with similar leak-out terms. In addition, at any time beginning on the day the closing price of Common Shares is at least $2.29 per share (as adjusted for stock splits and the like) for any 10 trading days within any 30 trading day period following the closing of the Business Combination, Maistros may sell up to 25% of Maistros's Common Shares held on that date that it was otherwise restricted from selling. The foregoing description of the Lock Up Agreement is not complete and is qualified in its entirety to the full text of the Lock Up Agreement, a copy of which is filed as an exhibit hereto.
Amended and Restated Articles of Incorporation
In addition to the provisions described above, the Amended and Restated Articles of Incorporation of the Issuer also provide that, among other things, the written consent of Maistros shall be required for the following matters (in addition to any other consents or approvals required by law or the Amended and Restated Articles of Incorporation), so long as it maintains at least 15% of the voting stock of the Issuer:
(a) the entry by the Issuer or any of its subsidiaries into any Discriminatory Transaction (as defined therein);
(b) conducting or engaging in any business other than the business in which the Issuer and its subsidiaries are engaged as of the date of the Amended and Restated Articles of Incorporation and any business reasonably related or ancillary thereto;
(c) increasing or decreasing the total number of directors constituting the board of directors;
(d) merging or consolidating the Issuer or any subsidiary of the Issuer, or a redomiciliation, domestication or conversion of the Issuer or any subsidiary of the Issuer;
(e) incurring any indebtedness (whether being principal, premium, interest or other amounts) for or in respect of (i) money borrowed, (ii) receivables financing, (iii) liabilities under or in respect of any acceptance or acceptance credit or (iv) any bonds, notes, debentures, loan capital, certificates of deposit, loan stock or other like instruments or securities offered, issued or distributed whether by way of public offer, private placement, acquisition consideration or otherwise and whether issued for cash or in whole or in part for a consideration other than cash, in each case in excess of $300,000, or any amendment, waiver or refinancing thereof;
(f) issuing any voting equity securities to any person (except for equity securities of a subsidiary of the Issuer to the Issuer or to another direct or indirect wholly owned subsidiary of the Issuer), including securities that rank senior to any existing equity securities, including without limitation, in respect of dividend distributions and/or distributions upon the liquidation, winding up or dissolution of the Issuer or any subsidiary of the Issuer or any other circumstances, other than equity securities issued pursuant to the Issuer's equity incentive plan;
(g) unless otherwise approved pursuant to Article V of the Amended and Restated Articles of Incorporation (or any transaction described in Article V(a)-(c)), the entry by the Issuer or any subsidiary of the Issuer into any "related party transaction" as such term is used in Item 7.B. of Form 20-F;
(h) any transaction (including any merger or consolidation) the consummation of which would result in any other person (or, in the case of a merger or consolidation, the shareholders of such other person) becoming, directly or indirectly, the beneficial owner of more than 49% of the voting stock or equity securities (other than debt securities) of the Issuer (measured in the case of voting stock by voting power rather than number of shares);
(i) amending the Amended and Restated Articles of Incorporation, the Bylaws of the Issuer or other applicable organizational documents of the Issuer or any subsidiary of the Issuer (including by way of filing a statement of designation);
(j) dissolving, reorganizing, or filing for voluntary bankruptcy of, or the commencement of any similar proceeding with respect to, including the consent to any involuntary bankruptcy of, the Issuer or any subsidiary of the Issuer;
(k) amending or approving the equity incentive plan of the Issuer, unless such amendment or approval is authorized by a vote of at least two-thirds of members of the board of directors of the Issuer;
(l) any acquisition, disposition or other transfer (in one transaction or a series of related transactions) of any assets (including any equity securities of any subsidiary of the Issuer), business operations or securities (other than equity securities of the Issuer), with a fair market value of more than $1,000,000, but excluding any disposition by the Issuer to, or acquisition by the Issuer from or of, a wholly owned subsidiary of the Issuer, or any disposition that arises as a matter of law or occurs pursuant to a court order;
(m) any repurchase of equity securities of the Issuer or any of its subsidiaries (other than wholly owned subsidiaries) pursuant to a self-tender offer, stock repurchase program, open market transaction or otherwise other than a repurchase of equity securities of the Issuer from employees or former employees subject to the terms and conditions of employee stock plans or a purchase of equity securities of the Issuer from a Shareholder pursuant to the Shareholders Agreement;
(n) a change of the Issuer's or any subsidiary's policies concerning the need for board of directors approval intended or reasonably likely to circumvent any Shareholder's rights under the Amended and Restated Articles of Incorporation or under the Shareholders Agreement or the exercise thereof;
(o) the establishment of any committee (including the appointment of the members thereof) or any amendment to the charter of any committee of the board of directors of the Issuer or to any corporate governance guideline relating to any matter addressed by the Shareholders Agreement that would reasonably be expected to circumvent in any manner any Shareholder's rights hereunder or the exercise thereof;
(p) entering into, amending or terminating (other than termination by its terms) service contracts whose duration exceeds two years or the cost exceeds $200,000 (whether directly or in potential early termination fees);
(q) entering into, amending or terminating (other than termination by its terms) any hedging or derivative instruments or arrangements, including swaps, hedges, interest rates interest rate protection agreement, foreign currency exchange agreement, commodity price protection agreement, bunker/oil hedges, or other interest rate, currency exchange rate or commodity price hedging instrument or arrangement;
(r) issuing any preferred stock, par value $0.001 per share, of the Issuer; and
(s) entering into an agreement for, or committing to agree to take, or consenting to, any of the foregoing actions.
Rhea has the same consent rights above for so long as it maintains at least 15% of the voting stock of the Issuer.
In addition, until neither Maistros nor Rhea own at least 15% of the issued and outstanding voting stock of the Issuer, neither the Issuer, the board of directors of the Issuer nor any committee thereof shall, without the written consent of Maistros and Rhea, extend, declare or enter into any shareholder rights plan, rights agreement or any other "poison pill", "proxy put" or other antitakeover arrangement, if such plan or arrangement would restrict the Maistros, Rhea and their affiliates from acquiring, agreeing to acquire or making a proposal to acquire beneficial ownership of any equity securities of the Issuer. After Maistros and Rhea no longer hold at least 15% of the Issuer's issued and outstanding voting stock, neither the board of directors of the Issuer nor any committee there of shall, without the Shareholders' prior written consent, extend, declare or enter into any shareholder rights plan, rights agreement or any other "poison pill", "proxy put" or other antitakeover arrangement that would restrict the Shareholder or their respective affiliates from consummating, or that would otherwise be triggered by, certain offers to purchase all outstanding equity securities by any Shareholder or its respective affiliates.
The foregoing description of the Amended and Restated Articles of Incorporation of the Issuer is not complete and is qualified in its entirety to the full text of the Amended and Restated Articles of Incorporation of the Issuer, a copy of which is filed by the Issuer with the Securities and Exchange Commission.
General
The Reporting Persons acquired beneficial ownership of the securities described in this Schedule 13D in connection with the closing of the Business Combination and intend to review their investments in the Issuer on a continuing basis. Any actions the Reporting Persons might undertake may be made at any time and from time to time without prior notice and will be dependent on the Reporting Persons' review of numerous factors, including, but not limited to, an ongoing evaluation of the Issuer's business, financial condition, operations and prospects; price levels of the Issuer's securities; general market, industry and economic conditions; the relative attractiveness of alternative business and investment opportunities; the financial needs of the Reporting Persons; and other future developments. No Reporting Person has any present plan or proposal which would relate to or result in any of the matters set forth in subparagraphs (a) - (j) of Item 4 of Schedule 13D except as set forth herein or such as would occur upon completion of any of the actions discussed above, although, depending on the factors discussed herein, the Reporting Persons may change their purpose or formulate different plans or proposals with respect thereto at any time. Depending upon overall market conditions, other investment opportunities available to the Reporting Persons, and the availability of Common Shares at prices that would make the purchase of additional Common Shares desirable, the Reporting Persons may endeavor to increase their position in the Issuer through, among other things, the purchase of Common Shares on the open market or in private transactions or otherwise, on such terms and at such times as the Reporting Persons may deem advisable. |