Item 1.01. Entry into a Material Definitive Agreement.
Stockholders’ Agreement
On August 2, 2021, we entered into the Stockholders’ Agreement with the Ares Parties. Pursuant to the Stockholders’ Agreement:
•We agreed to take any and all necessary action to cause our Board as soon as the Ares Parties request to be comprised of a total of ten directors (until the next annual or special meeting at which directors are elected following the closing of the Offering), including two designated representatives of the Ares Parties, and to permit the Ares Parties to continue to designate two representatives to the Board as long as the Ares Parties and their affiliates beneficially own more than or equal to 20% of our Common Stock, one representative as long as the Ares Parties and their affiliates beneficially own less than 20% but more than or equal to 10% of our Common Stock, and no representatives if the Ares Parties and their affiliates beneficially own less than 10% of our Common Stock. The Stockholders’ Agreement also requires us to take any and all necessary action to reduce the number of directors on the Board to nine (9) and to cause the Board to be comprised of a total of nine (9) directorships (in each case, including (or assuming) both of the Ares representatives are members of the Board) immediately following the first annual or special meeting at which directors are elected following the closing of the Offering.
•the Ares Parties agreed not to transfer any equity securities acquired in the Offering (including Common Stock, Pre-Funded Warrants and shares of Common Stock issuable upon exercise of the Pre-Funded Warrants) until twelve months following the initial closing of the Offering; provided, however, that certain transfers in connections with consolidations and reorganizations, tender or exchange offers, exercises of registration rights and certain distributions are permitted; and
•the Ares Parties agreed, with respect to themselves and their controlled affiliates acting on their behalf, for a period of time up to the earlier of the thirty-month anniversary of the date of closing of the Offering, or the earlier occurrence of the date in which the Ares Parties and their affiliates beneficially own less than 10% of our outstanding Common Stock, a change of control transaction, a material breach of the Stockholders’ Agreement by us, an event of default by us with respect to the our senior notes or credit agreements or other indebtedness exceeding $50.0 million, or any winding up, dissolution or liquidation or bankruptcy (subject to certain permitted exceptions):
◦not to transfer its Common Stock to competitors (as defined in the Stockholders’ Agreement) or any person that would beneficially own more than 20% of our Common Stock, subject to certain permitted exceptions;
◦not to take, or permit their controlled affiliates acting on their behalf to take, certain actions, subject to certain permitted exceptions, including, but not limited to:
◦making any public announcement, proposal or offer, with respect to (a) acquisitions of additional Common Stock, (b) any restructuring, recapitalization, liquidation or similar transaction, (c) the election of directors other than the Ares Parties’ designees or (d) changes to the Board and calling of special meetings;
◦publicly seek a change in the composition or size of the Board;
◦deposit any voting securities into a voting trust;
◦acquire any voting securities or beneficial ownership thereof greater than the Ares Parties’ beneficial ownership following closing of the Offering and 37.8% of the Common Stock on an Adjusted Outstanding Basis (as defined therein);
◦call for, or initiate, propose or requisition a call for any general or special meeting;
◦publicly state an intention, plan or arrangement to do any of the foregoing; or
◦intentionally and knowingly instigate, facilitate, encourage or assist any third party to do any of the foregoing; and
•to cause all voting securities to be present at any annual or special meeting in which directors are to be elected, to vote such securities either as recommended by the Board, or in the same proportions as votes cast by other voting securities with respect to director nominees or other nominees and in favor of any director nominee of the Ares Parties, not to vote in favor of a change of control transaction pursuant to which the Ares Parties would receive consideration that is different in amount or form from other stockholders unless approved by the Board; and
•the Ares Parties are afforded reasonable access to our books and records for so long as the Ares Parties have a right to designate a director to the Board.
Sixth Amendment to Registration Rights Agreement
In connection with the closing of the Offering, we also entered into the Sixth Amendment. Pursuant to the Sixth Amendment, the following securities become registrable securities:
•the shares of Common Stock issued to the Ares Parties pursuant to the Transaction Agreement or the Offering and from time to time held by the Ares Parties and their permitted transferees;
•the Pre-Funded Warrants issued in the Offering and from time to time held by the Ares Parties and their permitted transferees;
•Common Stock issuable upon exercise of the Pre-Funded Warrants issued in the Offering held by the Ares Parties and their permitted transferees;
•Common Stock held on the date of the Sixth Amendment by the Ares Parties; and
•all other shares of Common Stock acquired after the date of the Sixth Amendment by the Ares Parties and their permitted transferees or their affiliated funds, investment vehicles, co-investment vehicles and managed accounts.
The Sixth Amendment provides that we are obligated to use our commercially reasonable efforts to file a registration statement relating to the resale of such registrable securities by the Ares Parties no later than the close of the first business day following the expiration of the lock-up agreement that the Ares Parties entered into in connection with the Offering, to cause that registration statement to be declared effective, and to keep that registration statement effective for so long as is necessary to permit the disposition of the registrable securities.
Pre-Funded Warrants
On August 2, 2021, we issued Pre-Funded Warrants to purchase 7,747,589 shares of our Common Stock to ASOF in connection with the closing of the Offering. The Pre-Funded Warrants have an exercise price of $0.0001 per share. The exercise price is subject to appropriate adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting our Common Stock.
The Pre-Funded Warrants do not expire and are exercisable at any time after their original issuance. The Pre-Funded Warrants are exercisable, at the option of the holder, in whole or in part by delivering to us a duly executed exercise notice and by payment in full of the exercise price in immediately available funds for the number of shares of Common Stock purchased upon such exercise. As an alternative to payment in immediately available funds, the holder may elect to exercise the Pre-Funded Warrant through a cashless exercise, in which the holder would receive upon such exercise the net number of shares of Common Stock determined according to the formula set forth in the Pre-Funded Warrant. No fractional Common Stock will be issued in connection with the exercise of a Pre-Funded Warrant.
The Pre-Funded Warrants may not be exercised by the holder to the extent that the holder, together with its affiliates that report together as a group under the beneficial ownership rules, would beneficially own, after such exercise more than 32% (or, at the election of the holder, 9.99%) of our issued and outstanding Common Stock.
Furthermore, the Pre-Funded Warrants restrict the ability to be exercised if the exercise of such Pre-Funded Warrants could result in a required filing under the Hart-Scott-Rodino Antitrust Improvements Act (the “HSR Act”) until such time as we and the exercising party have received clearance under the HSR Act.
Subject to applicable laws, the Pre-Funded Warrants may be offered for sale, sold, transferred or assigned without our consent.
There is no established trading market for the Pre-Funded Warrants and we do not expect a market to develop. In addition, we do not intend to apply for the listing of the Pre-Funded Warrants on any national securities exchange or other trading market. Without an active trading market, the liquidity of the Pre-Funded Warrants will be limited.
In the event of a fundamental transaction, as described in the Pre-Funded Warrants and generally including any reorganization, recapitalization or reclassification of our Common Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person requiring approval of our stockholders (except under limited circumstances), the acquisition of more than 50% of our Common Stock outstanding, or any person or group becoming the beneficial owner of 50% of the voting power represented by our Common Stock outstanding, upon consummation of such a fundamental transaction, the holders of the Pre-Funded Warrants will be entitled to receive upon exercise of the Pre-Funded Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the Pre-Funded Warrants immediately prior to such fundamental transaction without regard to any limitations on exercise contained in the Pre-Funded Warrants.
In addition, if any fundamental transaction is approved by a stockholder vote with a margin such that the transaction would not have been approved had all of the Pre-Funded Warrants been converted into shares of Common Stock as of the applicable record date for such vote and voted against such fundamental transaction, then we may not consummate such fundamental transaction without a prior written approval of holders of the Pre-Funded Warrants corresponding to a number of such shares of Common Stock that, if voted in favor of such fundamental transaction would have resulted in approval of such fundamental transaction if the remainder of such as converted shares of Common Stock had been voted against such fundamental transaction.
The holder of a Pre-Funded Warrant does not have the rights or privileges of a holder of our Common Stock with respect to the shares underlying such warrants, including any voting rights, until the holder exercises the Pre-Funded Warrant except for the following rights:
•the right to participate in any distributions of assets, including cash, stock or other property to our stockholders;
•the right to participate in any rights granted to stockholders to purchase capital stock or other property; and
•certain consent rights with respect to fundamental transactions as described above.
The foregoing summary of the Stockholders’ Agreement, Sixth Amendment and Pre-Funded Warrants does not purport to be complete and is qualified in its entirety by full copies of the Stockholders’ Agreement, Sixth Amendment and Pre-Funded Warrant which are filed as Exhibits 10.1, 10.2 and 10.3 to this Current Report on Form 8-K and incorporated by this reference herein as if set forth in full.