Page 6 of 25 – SEC Filing
purchase 5,524,926 shares (the Purchased Series A Shares) of the Issuers Series A Convertible Participating Preferred Stock, $0.0001 par value per share (the Preferred Stock), for an aggregate purchase price of $9,199,001 (the Private Placement). All Purchased Series A Shares held by Sagard were acquired with Sagards working capital.
Item 4. Purpose of Transaction.
As described in Item 3, on March 23, 2018, Sagard entered into the Preferred Stock Purchase Agreement with the Issuer providing for the Private Placement to Sagard, on the terms and subject to the conditions of the Preferred Stock Purchase Agreement, of 5,524,926 newly issued Purchased Series A Shares, for an aggregate cash purchase price of $9,199,001, which was paid in cash to the Issuer and/or upon its direction and consent, including the payment of certain indebtedness of the Issuer and the payment of Sagards legal fees. The closing of the Private Placement occurred on March 23, 2018.
Preferred Stock Purchase Agreement
The Preferred Stock Purchase Agreement provides for customary representations, warranties and covenants among the parties. Among other things, the Preferred Stock Purchase Agreement required that the Issuer (i) file a certificate of designation providing for the rights, preferences and privileges of the Preferred Stock with the Secretary of State of the State of Delaware (the Certificate of Designation) and (ii) enter into a Registration Rights Agreement (as defined below) with Sagard providing for the registration of shares of the Voting Common Stock issuable upon conversion of the Purchased Series A Shares (the Conversion Shares).
In addition, so long as Sagard or its affiliates own, in the aggregate, no less than 50% or more of the cumulative amount of the Purchased Series A Shares issued in the Private Placement and Conversion Shares, taken together, Sagard and its affiliates have the right to purchase (x) 100% of the first $10 million of any new equity securities or equity-linked securities issued by the Issuer and, thereafter, (y) a pro rata portion of any new equity securities or equity-linked securities that the Issuer may issue from time to time, subject to certain exceptions specified in the Preferred Stock Purchase Agreement, including but not limited to the Issuers right to issue an additional $2.0 million of Voting Common Stock within 20 business days of the closing of the Private Placement.
The Purchased Series A Shares are subject to a 12-month lock-up period, which period may be shortened in limited circumstances specified in the Preferred Stock Purchase Agreement.
As set forth below under Series A Preferred Stock, the holders of a majority of the outstanding shares of Preferred Stock have board designation rights. Moreover, at such time as no shares of Preferred Stock are outstanding, and so long as Sagard holds (i) at least 35% of the total number of the Conversion Shares that have been issued upon conversion of all shares of Preferred Stock issued in the Private Placement, Sagard shall be entitled thereunder to nominate two directors of the Issuer (each, a Series A Director) and (ii) less than 35% but at least 20% of the total number of the Conversion Shares that have been issued upon conversion of all shares of Preferred Stock issued in the Private Placement, Sagard shall be entitled thereunder to nominate one director of the Issuer.
Notwithstanding the foregoing, the number of Series A Directors shall be reduced to the extent necessary to comply with the Issuers obligations, if any, under the rules or regulations of the Nasdaq Stock Market (including Nasdaq Listing Rule 5640). The Preferred Stock Purchase Agreement provides that, if one Series A Director may not be appointed due to compliance with Nasdaq Listing Rule 5640, then Sagard shall be entitled to designate one Board Observer to attend meetings of the Board, the board of directors of any subsidiary of the Issuer and each committee of any of the foregoing as an observer.
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