Item 1.01 Entry into a Material Definitive Agreement
As previously disclosed, on August 12, 2021, Protalix BioTherapeutics, Inc. (the “Company”) entered into definitive agreements (the “Exchange Agreements”) relating to exchanges (the “Exchanges”) of an aggregate of $54.65 million principal amount of the Company’s outstanding 7.50% Senior Secured Convertible Notes due 2021 (the “Existing Notes”) for an aggregate of $28.75 million principal amount of newly issued 7.50% Senior Secured Convertible Notes due 2024 (the “Exchange Notes”), $25.90 million in cash and an additional approximately $1.1 million in cash representing accrued and unpaid interest on the Existing Notes through the closing date. The Exchanges were completed on August 25, 2021, in accordance with the terms of the Exchange Agreements. The initial conversion rate of the Exchange Notes is 563.2216 shares of the Company’s Common Stock (“Common Stock”) per $1,000 principal amount of Exchange Notes, which is equivalent to an initial conversion price of $1.7755 per share of Common Stock, subject to adjustment in certain circumstances. After giving effect to the Exchanges, $3.27 million aggregate principal amount of the Existing Notes are currently outstanding.
In order to facilitate the Exchanges, on August 24, 2021, the Company and its subsidiaries, Protalix Ltd. and Protalix BV, entered into a Third Supplemental Indenture (the “Third Supplemental Indenture”), with The Bank of New York Mellon Trust Company, N.A., as trustee, registrar, paying agent and conversion agent, and Wilmington Savings Fund Society, FSB, as the collateral agent, supplementing the Indenture, dated as of December 7, 2016, as amended or supplemented, (the “Existing Indenture”), relating to the Existing Notes. The Third Supplemental Indenture amends the Existing Indenture to, among other matters, permit the Company to issue the Exchange Notes. The Company received the consent to enter into the Third Supplemental Indenture from the holders of 77% of the aggregate principal amount of the Existing Notes outstanding as of the close of business on August 16, 2021, in accordance with Section 9.02 of the Existing Indenture. The foregoing description of the Third Supplemental Indenture does not purport to be complete and is qualified in its entirety by reference to the full text of the Third Supplemental Indenture, a copy of which is filed as Exhibit 4.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The Exchange Notes were issued pursuant to an Indenture entered into between the Company, the guarantors party thereto, The Bank of New York Mellon Trust Company, N.A., as trustee and Wilmington Savings Fund Society, FSB, as collateral agent (the “Indenture”). Interest on the Exchange Notes will be payable semi-annually at a rate of 7.50% per annum. The Exchange Notes mature on September 1, 2024, unless earlier purchased, converted, exchanged or redeemed, and will be guaranteed by the Company’s subsidiaries.
Holders may require the Company to repurchase their Exchange Notes upon the occurrence of certain events that constitute a fundamental change under the Indenture at a purchase price equal to the principal amount thereof plus accrued and unpaid interest to, but excluding, the fundamental change purchase date.
Holders may convert their Exchange Notes at any time prior to the close of business on the business day immediately preceding the stated maturity date of the Exchange Notes. Upon conversion, the Company may, at its election, deliver shares of Common Stock, cash or a combination of shares of Common Stock and cash based on the applicable conversion rate. However, until the Company obtains stockholder approval to issue additional shares of Common Stock upon conversion of the Exchange Notes, the Company will be required to settle at least a portion of its conversion obligation in cash. The Company intends to seek stockholder approval promptly in order to settle conversions of the Exchange Notes in Common Stock.
The Indenture includes covenants customary for instruments of this type, including, without limitation, restrictions on the Company’s ability to incur additional indebtedness, create liens on its properties, pay dividends and make restricted payments or certain investments, and also requires the Company to apply a portion of the proceeds from certain asset sales or licensing arrangements to redeem the Notes, in each case subject to certain exceptions. The foregoing descriptions of the Indenture and the Exchange Note do not purport to be complete and are qualified in their entirety by reference to the full text of such documents, filed hereto as Exhibit 4.2 and Exhibit 4.3, respectively, and incorporated herein by reference.
Like the Existing Notes and at equal priority, the Exchange Notes will be secured by perfected liens on all of the material assets of the Company and its subsidiaries (subject to certain exceptions and permitted liens). In connection therewith, the Company and its subsidiaries, as guarantors, entered into a U.S. Security Agreement, dated of August 24, 2021 with Wilmington Savings Fund Society, FSB, as collateral agent (the “U.S. Security Agreement”). In addition, Protalix Ltd. entered into a Security Agreement/Debenture, dated of August 24, 2021, with Altshuler Shaham Trusts Ltd., as security trustee (the “Israeli Security Agreement”). The U.S. Security Agreement and the Israeli Security