On July 11, 2019, the Separately Filing Group Member entered into a securities purchase agreement (the “Purchase Agreement”) with the Issuer, pursuant to which the Separately
Filing Group Member purchased 15,000,000 shares of the Issuer’s Common Stock (the “Shares”) and a warrant to purchase up to an additional 15,000,000 shares of the Issuer’s Common Stock (the “Warrant”). The aggregate purchase price for the Shares
and the Warrant was $9,000,000 in cash, which was paid to the Issuer at the closing of the purchase and sale on July 11, 2019 (the “Closing”).
The Warrant is immediately exercisable, has a term of one-year following Closing, and provides the Separately Filing Group Member with the right to purchase up to 15,000,000
shares of Common Stock (the “Warrant Shares”) at an exercise price of $0.78 per share, subject to adjustments in the event of certain stock splits, stock dividends or distributions, reorganizations, reclassifications or other similar events. The
Warrant shall be automatically exercised upon the occurrence of the following:
If the Separately Filing Group Member fails to pay the exercise price upon the automatic exercise of the Warrant, then the Warrant shall thereafter terminate in its entirety.
Investor Rights Agreement
On July 11, 2019, in connection with the Purchase Agreement, the Separately Filing Group Member, the Issuer
and certain shareholders of the Issuer (the “Shareholders”) entered into an Investor Rights Agreement (the “IRA”). Pursuant to the IRA, the Issuer and the Shareholders agreed to cause the Issuer’s board of directors (the “Board”) to be set
at seven directors.
The Separately Filing Group Member has the right to designate two members of the Board (the “Investor Designees”), and the Shareholders have agreed to vote their shares of Common
Stock in favor of the election of the Investor Designees. For so long as any Investor Designees serve on the Board, the Issuer must obtain the approval of the Board, including all of the Investor Designees, before taking certain actions,
such as amending the Issuer’s charter documents, offering to sell any new securities, creating any debt security, approving a change of control, changing the strategy or principal lines of business of the Issuer, liquidating or dissolving the
Issuer or agreeing to make expenditures in excess of $1,000,000. In addition, in the event that the Issuer proposes to offer any new securities (subject to certain standard exceptions), the Separately Filing Group Member has a right of first
offer to purchase such securities. Under the IRA, the Separately Filing Group Member and the Shareholders have agreed for a period of one year following the closing of the transaction that they will not sell or otherwise transfer any shares
of Common Stock or other securities of the Issuer, subject to certain standard exceptions. In addition, pursuant to the IRA, the Issuer has granted the Separately Filing Group Member certain demand registration rights (after the expiration
of the lock-up described in the preceding sentence) and piggyback registration rights with respect to the Shares and the Warrant Shares.
Standstill Agreements
In connection with the Purchase Agreement, the Reporting
Person and the Separately Filing Group Member entered into separate Standstill Agreements.
Under the Standstill Agreements, the Reporting Person and the Separately Filing Group Member, on behalf of
themselves and each of their respective affiliates, agreed to not acquire, on the open market or otherwise, any loans, debt securities, equity securities, or assets of the Issuer or any of its subsidiaries, or rights or options to acquire
interests in any of the Issuer’s loans, debt securities, equity securities, or assets, except for the purchase of the Shares and the Warrant pursuant to the Purchase Agreement, the purchase of the Warrant Shares pursuant to the exercise of
the Warrant, or as otherwise provided below. The Reporting Person and the Separately Filing Group Member also agreed, on behalf of themselves and each of their respective affiliates, to not make any proposal or offer to acquire the Issuer
through any business combination, merger, tender offer, exchange offer, or similar transaction, acquire any of the Issuer’s securities or seek representation on the Board (other than the Investor Designees). Notwithstanding the foregoing, as
an exception to the restrictions described above, the Separately Filing Group Member shall be permitted to acquire in the open market, from time to time, up to such additional number of shares of Common Stock equal to 50% of the Warrant
Shares that have been purchased upon exercise of the Warrant as of such time, and the Reporting Person shall be permitted to acquire in the open market, from time to time, up to such additional number of shares of Common Stock such that the
Reporting Person’s aggregate ownership of Common Stock equals (but does not exceed) 9.99% of the Issuer’s outstanding Common Stock as of such time (on an outstanding basis and not on a fully diluted basis); and the Separately Filing Group
Member shall be permitted (as an exception to the restrictions described above) to exercise all of its rights, including its right of first offer, pursuant to the IRA, in full and without restriction. The restrictions set forth in the
Standstill Agreements shall terminate and be
of no further force or effect on the earlier to occur of (i)
July 11, 2021 and (ii) the date on which the Warrant is exercised in full.
Item 5.
Interest in Securities of the Issuer.