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Item 1.01.
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Entry into a Material Definitive Agreement.
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Convertible Notes
On February 22, 2021, Pareteum Corporation
(the “Company”) closed the issuance of $2.4 million aggregate principal amount of its Senior Second Lien Secured
Convertible Notes due 2025 (the “Notes”). The Notes are being sold under the Securities Purchase Agreement,
dated as of February 22, 2021, entered into by and between the Company and an institutional investor (the “Purchaser”).
The aggregate purchase price for the Notes and Warrant (as defined below) was $2.0 million.
The Notes are senior, secured obligations
of the Company, but rank junior to the Senior Secured Convertible Note due 2025, dated as of June 8, 2020, issued by the Company
and held by High Trail Investments SA LLC (the “Existing Note”). Interest is payable monthly beginning April
1, 2021 at a rate of 8% per annum. The Notes are secured by a second lien on substantially all assets of the Company and substantially
all assets of its material U.S.-organized subsidiaries. Interest may be paid, at the election of the Company, in cash or in shares
of common stock of the Company; provided, that, so long as the Existing Note remains outstanding, such payments may only be made
in shares. The number of shares issuable to pay interest in shares is determined by the application of a formula in which the
amount of the interest due is divided by 85% of the lowest volume-weighted average price of the Company’s common stock on
the principal market for the Company’s common stock over the 10 days preceding the date of such payment.
Subject to an intercreditor agreement with
the holder of the Existing Note, upon notice by the Company, the Company may elect to redeem all or a portion of the then-outstanding
principal amount outstanding under the Note. The Holder or the Company may also elect for the Company to redeem the Notes at a
20% premium if the Company undergoes a fundamental change.
The Notes will be convertible into Conversion
Shares, in part or in whole, from time to time, at the election of the Holder. The initial conversion rate is 1666.6667 shares
of Company common stock for each $1,000 of principal amount of Notes. The conversion rate is subject to customary anti-dilution
adjustments in the event the Company issues stock dividends or effects a split or reverse split of the Company’s common
stock.
The Notes impose certain customary affirmative
and negative covenants upon the Company, as well as covenants requiring that (i) payments under the Notes rank senior to all unsecured
indebtedness of the Company, (ii) restrict the declaration of any dividends or other distributions and (iii) require the Company
and its subsidiaries to maintain certain minimum revenues. The Notes contain customary events of default.
The Company intends to use the net proceeds
from the offering of the Notes for general corporate purposes.
The foregoing description is qualified
in its entirety by the terms of the Note, which is incorporated herein by reference and attached hereto as Exhibit 10.1.
Securities Purchase Agreement
On February 22, 2021, the Company entered
into a Securities Purchase Agreement (the “SPA”) with the Purchaser that provides for the purchase by the Purchaser
of the Notes and a Warrant to Purchase Common Stock issued by the Company (the “Warrant”). Under the terms of SPA, the Company also agreed to cancel the Warrant to Purchase Common Stock issued by the Company to the Purchaser
on March 24, 2019. The SPA contains
customary representations and warranties, including representations from the Purchaser regarding its status as an “accredited
investor” and its investment purpose, and representations from the Company regarding its organization, authorization to
enter into the transaction, ability to conduct its business, capitalization, absence of conflicts and compliance with law, among
other things.
The SPA includes a number of customary
covenants with which the Company must comply, including covenants that require the Company to, among other things, use the proceeds
of the sale of the Notes and Warrant for general corporate purposes and keep reserved a number of shares of its common stock equal
to the number issuable upon conversion of the Note and exercise of the Warrant.
There is no material relationship between
the Company or its affiliates, on the one hand, and the Purchaser, on the other hand, other than in respect of the SPA, the Note
and the Warrant, except that the Purchaser beneficially owns other securities of the Company. The foregoing description is qualified
in its entirety by the terms of the SPA, which is incorporated herein by reference and attached hereto as Exhibit 10.2.
Warrant
In connection with the entry into the SPA
and the issuance of the Note, the Company issued a warrant to purchase 2,775,000 shares of its common stock to the Purchaser.
The Warrant entitles the Purchaser to purchase 2,775,000 shares of the Company’s common stock at an exercise price of $0.40
per share. The Warrant is immediately exercisable by the holder, in whole or in part, at any time, and from time to time, until
the fifth anniversary of the issue date. The terms of the Warrant provide that the exercise price of the Warrant, and the number
of shares of common stock for which the Warrant may be exercised, are subject to adjustment to account for increases or decreases
in the number of outstanding shares of common stock resulting from stock splits, reverse stock splits, consolidations, combinations
and reclassifications.
The foregoing description is qualified
in its entirety by the terms of the Warrant, which is incorporated herein by reference and attached hereto as Exhibit 10.3.