Amendment to Stockholder Rights Agreement
The information set forth under “Item 3.03 Material Modification to Rights of Security Holders” of this Current Report on Form 8-K with respect to the entry into Amendment 2 to the Stockholder Rights Agreement (as described below) is incorporated into this Item 1.01 by reference in its entirety.
| Item 3.02 | Unregistered Sales of Equity Securities. |
The information contained under “SPA Agreement” with respect to the Series C Preferred Shares in Item 1.01 above is incorporated by reference into this Item 3.02. The Series C Preferred Shares were sold in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D promulgated thereunder.
| Item 3.03 | Material Modification to Rights of Security Holders. |
The Company entered into an amendment, effective as of May 10, 2023 (“Amendment 2”), to the Stockholder Rights Agreement, dated as of March 17, 2023 (the “Stockholder Rights Agreement”), between the Company and Continental Stock Transfer & Trust Company, as Rights Agent, as amended by Amendment No. 1 thereto, dated as of May 4, 2023. Amendment 2 amends the Stockholder Rights Agreement by amending the definition of “Acquiring Person” in Section 1(a) of the Stockholder Rights Agreement to provide that the parties to the SPA Agreement will not be deemed to be an “Acquiring Person” solely by virtue of, or as a result of, the parties’ entry into the SPA Agreement, the issuance of the Series C Preferred Shares to GBH, and the performance or consummation of any of the other transactions contemplated by the SPA Agreement, among other conditions, under the terms and conditions set forth in Amendment 2.
The foregoing description of Amendment 2 does not purport to be complete and is qualified in its entirety by reference to the full text of Amendment 2, which is attached hereto as Exhibit 4.2 and is incorporated by reference in its entirety.
| Item 5.03 | Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year. |
Pursuant to the terms of the SPA Agreement, on May 10, 2023, the Company filed a Certificate of Designations of Series C Non-Voting Convertible Preferred Stock (the “Certificate of Designations”) with the Delaware Secretary of State establishing the rights, preferences and limitations relating to the Series C Preferred Shares. The Series C Preferred Shares are intended to provide GBH with economic rights equivalent to the Company’s common stock on an as converted basis. The Series C Preferred Shares have no voting rights, are not transferrable other than to an affiliate of GBH, the Company or an affiliate of the Company, and have the same priority with regard to dividends, distributions and payments as the common stock and the Series A non-voting convertible preferred stock.
In connection with the Transaction, the Company issued 13,087 Series C Preferred Shares, which are convertible into an aggregate of 13,087,000 shares of common stock, subject to certain restrictions described in this Item 5.03 and above under the heading “Item 1.01 Entry Into a Material Definitive Agreement – Investor Rights Agreement.”
Restrictions on Conversion of Series C Preferred Shares
The Series C Preferred Shares are convertible into 13,087,000 shares of the Company’s common stock, subject to the following restrictions:
| | • | | Conversion only in Connection with Sales. Each Series C Preferred Share is convertible only in connection with the sale of all or any portion of the Company’s common stock on an arms-length basis by a holder of such Series C Preferred Shares to a bona fide third-party purchaser, pursuant to (i) an effective registration statement under the Securities Act or (ii) an exemption from registration under the Securities Act, provided any such sale is conditioned on the terms of the Investor Rights Agreement and the execution and delivery of documents as reasonably necessary to effectuate such sale. |
| | • | | Limitation on Beneficial Ownership. As described in the Certificate of Designations, the Company will not issue, and GBH will not have the right to require the Company to issue, any shares of common stock upon conversion of the Series C Preferred Shares if, as a result of such conversion, GBH (together with its affiliates and certain attributable parties) would beneficially own in excess of 4.99% of the shares of the Company’s common stock outstanding immediately after giving effect to such conversion. |
| | • | | Exchange Cap. As described in the Certificate of Designations, the Company will not issue any shares of common stock upon conversion of the Series C Preferred Shares if the issuance would exceed the aggregate number of shares of common stock that the Company may issue without breaching its obligations under the rules of the New York Stock Exchange, unless the Company obtains stockholder approval for the issuance of the Company’s common stock upon conversion of the Series C Preferred Shares in excess of such amount. |
The foregoing description of the Certificate of Designations does not purport to be complete and is qualified in its entirety by reference to the full text of the Certificate of Designations, which is attached hereto as Exhibit 3.1 and is incorporated by reference in its entirety.
