Item 1.01. Entry into a Material Definitive Agreement.
Series C Convertible Preferred Stock Purchase Agreements
On March 17, 2021, NextDecade Corporation (the “Company”) entered into a Series C Convertible Preferred Stock Purchase Agreement (collectively, the “Series C Stock Purchase Agreements”) with each of (i) York Capital Management, L.P. and certain of its affiliates (“York”), (ii) certain affiliates of Bardin Hill Investment Partners LP (“Bardin Hill”), and (iii) Avenue Energy Opportunities Fund II, L.P (“Avenue” and together with York and Bardin Hill, the “Purchasers”) pursuant to which the Company agreed to sell, and the Purchasers agreed to purchase shares of the Company’s Series C Convertible Preferred Stock, par value $0.0001 per share (the “Series C Preferred Stock”), together with associated Warrants (as defined below), for an aggregate purchase price of $24.5 million. The consummation of the transactions contemplated by the Series C Stock Purchase Agreements are expected to occur at multiple closings on or prior to March 22, 2021 (the “Closing Date”), subject to customary closing conditions. York and Bardin Hill, or their affiliates, are each stockholders of the Company having the right to appoint one or more directors to the Company’s board of directors.
The Company is conducting the offering of the Series C Preferred Stock (the “Offering”) in reliance on the exemption from registration requirements provided by Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), or any other applicable Securities Act exemptions available to the Company.
The following summary of the material terms of the Series C Stock Purchase Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the form of Series C Stock Purchase Agreement attached hereto as Exhibit 10.1.
Purchase Price. The purchase price of the Series C Preferred Stock is $1,000 per share, for a total purchase price of $24.5 million (the “Aggregate Purchase Price”).
Number of Shares of Series C Preferred Stock. The Purchasers have agreed to purchase an aggregate of 24,500 shares of Series C Preferred Stock for the Aggregate Purchase Price, excluding additional shares of Series C Preferred Stock to be issued to the Purchasers as origination fees for the Offering (described below) .
Origination Fees. The Company will issue as an origination fee to each of the Purchasers a number of additional shares of Series C Preferred Stock equal to approximately two percent (2%) of the shares of Series C Preferred Stock purchased by such Purchaser under its Series C Stock Purchase Agreement. York, Bardin Hill, and Avenue will receive 240, 50, and 200 shares of Series C Preferred Stock, respectively, as origination fees.
Representations, Warranties and Covenants. The Series C Stock Purchase Agreements contain customary representations, warranties and covenants from the Company and the Purchasers.
Other Agreements. Additional agreements are required to be executed and delivered on the Closing Date, including the Warrant Agreements and the Registration Rights Agreements. Forms of these agreements are summarized below and are attached as exhibits hereto.
Certificate of Designations of Series C Preferred Stock
The rights and designations of the Series C Preferred Stock are set forth in the Certificate of Designations of Series C Convertible Preferred Stock (the “Series C Certificate of Designations”). Pursuant to the Series C Certificate of Designations, the Company is authorized to issue up to 166,364 shares of Series C Preferred Stock.
The following summary of the material terms of the Series C Certificate of Designations does not purport to be complete and is qualified in its entirety by reference to the full text of the Series C Certificate of Designations, which is attached hereto as Exhibit 3.1.
Optional Conversion. The Company has the option to convert all, but not less than all, of the Series C Preferred Stock into shares of common stock, par value $0.0001 per share (the “Common Stock”), at a conversion price of $2.9632 per share of Common Stock (the “Conversion Price”) on any date on which the volume weighted average trading price of shares of Common Stock for each trading day during any sixty (60) of the prior ninety (90) trading days is equal to or greater than 175% of the conversion price of the Company’s Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and Series B Convertible Preferred Stock (the “Series B Preferred Stock”), in each case subject to certain terms and conditions. In the event that the Company elects to convert the Series C Preferred Stock, the Company must also convert each series of then-issued and outstanding Parity Stock (as defined in the Series C Certificate of Designations) at the same time (if, with respect to any Parity Stock issued after the Closing Date.
Mandatory Conversion. The Company must convert all of the Series C Preferred Stock into shares of Common Stock at the Conversion Price on the earlier of (i) ten (10) Business Days (as defined in the Series C Certificate of Designations) following a FID Event (as defined in the Series C Certificate of Designations) and (ii) March 17, 2031, the tenth (10th) anniversary of the date of the Series C Certificate of Designations.
Dividends. The Series C Preferred Stock accrues dividends on the Series C Liquidation Preference (as defined in the Series C Certificate of Designations), which will be cumulative and accrue at a rate of twelve percent (12%) per annum. The dividends will be payable quarterly in cash or in-kind, at the Company’s option. The Series C Preferred Stock will also participate, on an as-converted basis, in any dividends paid to the holders of shares of Common Stock. The Company currently anticipates that it will elect to pay dividends on the Series C Preferred Stock in-kind, rather than in cash.
Anti-Dilution. The Conversion Price and the exercise price for the Warrants (as described below) will be subject to proportional adjustment for certain transactions relating to the Company’s capital stock, including stock splits, stock dividends and similar transactions and the Conversion Price will be subject to adjustments to reflect additional issuances of Common Stock, subject to certain exceptions.
Limitation on Conversion. Unless and until the Company has obtained stockholder approval in accordance with Nasdaq Listing Rule 5635(d) to permit the issuance of the maximum number of shares of Common Stock issuable upon conversion of the Series C Preferred Stock and exercise of the Warrants (as defined below) issued in the Offering (the “Required Approval”), the number of shares of Common Stock that may be issued (i) under the Series C Certificate of Designations, including upon the conversion of dividends paid-in-kind as shares of Series C Preferred Stock (“PIK Shares”), and (ii) upon the exercise of Warrants issued in connection with the Series C Convertible Preferred Stock, in the aggregate, may not exceed 19.99% of the total shares of Common Stock issued and outstanding as of the effective date of the Series C Purchase Agreements (the “Maximum Amount”). The holders of Series C Preferred Stock shall not be entitled to vote any shares of Series C Preferred Stock for the Required Approval.
Pursuant to the Series C Certificate of Designations, the Company will use commercially reasonable best efforts to obtain the Required Approval at its annual meeting of stockholders to be held on or before June 30, 2021.
Warrant Agreements
The following summary of the material terms of the Warrant Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the Form of Warrant Agreement, which is attached hereto as Exhibit 4.1.
Warrants. The Series C Preferred Stock will be issued with detached warrants (the “Warrants”). The Warrants will represent the right to acquire in the aggregate a number of shares of Common Stock equal to approximately 35 basis points (0.35%) of all outstanding shares of Common Stock, measured on a fully diluted basis, on the exercise date for an exercise price of $0.01 per share. The Warrants will have a fixed three-year term commencing on the Closing Date.
Warrant Exercise. The Warrants may only be exercised by holders of Warrants at the expiration of such three-year term, except that the Company can force exercise of the Warrants prior to the expiration of the term if (i) the volume weighted average trading price of shares of Common Stock for each trading day during any sixty (60) of the prior ninety (90) trading days is equal to or greater than 175% of the conversion price of the Series A Preferred Stock and the Series B Preferred Stock and (ii) the Company simultaneously elects to force a mandatory exercise of all other warrants then-outstanding and unexercised and held by any holder of Parity Stock (as defined in the Series C Certificate of Designations).
Limitation on Exercise. Unless and until the Company has obtained the Required Approval, the number of shares of Common Stock that may be issued (i) under the Series C Certificate of Designations, including upon conversion of PIK Shares, and (ii) upon the exercise of Warrants issued in the Offering, in the aggregate, may not exceed the Maximum Amount.
Registration Rights Agreements
The holders of shares of Series C Preferred Stock will have customary demand and piggy-back registration rights covering shares of Common Stock underlying (i) the Series C Preferred Stock (including any Common Stock underlying the Series C Preferred Stock issued (a) as PIK Shares, and (b) in respect of the origination fees), and (ii) the Warrants pursuant to the Registration Rights Agreements. The foregoing summary of the material terms of the Registration Rights Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the Form of Registration Rights Agreement, which is attached hereto as Exhibit 10.2.
No Offer or Solicitation
THE INFORMATION CONTAINED IN THIS CURRENT REPORT ON FORM 8-K IS NOT AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SHARES OF SERIES C PREFERRED STOCK OR ANY OTHER SECURITIES OF THE COMPANY. THE SHARES OF SERIES C PREFERRED STOCK AND THE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION UNDER THE SECURITIES ACT OR AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE COMPANY IS FILING THIS CURRENT REPORT ON FORM 8-K WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION FOR THE SOLE PURPOSE OF REPORTING ITS ENTRY INTO THE SERIES C STOCK PURCHASE AGREEMENTS, AS REQUIRED BY THE RULES AND REGULATIONS OF THE COMMISSION.