Filing Details

 

 

 

Voting Rights

Holders of the Series A Preferred Stock are entitled to vote on an as-converted basis together with the holders of Issuer’s Common Stock as a single class on all matters submitted to a vote of stockholders of the Issuer, except as otherwise provided in the Certificate of Designations or as required by applicable law. In addition, for so long as any shares of Series A Preferred Stock remains issued and outstanding, the holders are entitled to vote as a separate class on any amendment to the Certificate of Designations that relates solely to the terms of the Series A Preferred Stock.

For so long as any shares of the Series A Preferred Stock are outstanding, the prior affirmative vote of at least a majority of the then-issued and outstanding shares of Series A Preferred Stock, voting as a separate class, will be required to (i) amend the Issuer’s Certificate of Incorporation or Bylaws in a manner adverse to the Series A Preferred Stock, (ii) amend the Certificate of Designations, (iii) authorize or increase the number of authorized shares of Parity Stock or Senior Stock (each defined below), and (iv) solely for so long as Investor A has the consent rights described in Item 6 under “Investor Rights Agreement” below, to incur indebtedness if the aggregate amount of indebtedness of the Issuer and its subsidiaries immediately after such incurrence is in excess of 105% of the aggregate amount of indebtedness of the Issuer and its subsidiaries as of December 31 in the prior calendar year.

Ranking

The Series A Preferred Stock ranks (i) senior to Common Stock and all other classes and series of capital stock of the Issuer that do not expressly rank on a parity basis with or senior to the Series A Preferred Stock (“Junior Stock”), (ii) on a parity basis with each other class or series of capital stock of the Issuer the terms of which expressly provide that such class or series ranks on a parity basis with the Series A Preferred Stock as to dividends or rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Issuer (“Parity Stock”) and (iii) junior to each other class or series of capital stock of the Issuer authorized, classified or reclassified, the terms of which expressly provide that such class or series ranks senior to the Series A Preferred Stock as to dividends or rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Issuer (“Senior Stock”) and to all existing and future indebtedness and other non-equity claims on the Issuer.

Dividends

The Certificate of Designations provides that each holder of the Series A Preferred Stock will be entitled to receive, when, as and if authorized and declared by the Board, dividends accruing daily on the basis of twelve 30-day months and a 360-day year, at a per annum rate of 11.00% of the Liquidation Preference per share of Series A Preferred Stock, which may be paid in cash or added to the Liquidation Preference of such share of Series A Preferred Stock.  In addition, shares of the Series A Preferred Stock are entitled to participate on an as-converted basis in Common Stock dividends.

So long as any shares of Series A Preferred Stock remain outstanding, unless full dividends on all outstanding shares of Series A Preferred Stock have been declared and paid in cash, the Issuer is prohibited from declaring any dividends on, or making any distributions relating to, Junior Stock or Parity Stock, subject to certain exceptions.

If any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Issuer occurs, the holders of Series A Preferred Stock will be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Issuer may be made to or set aside for the holders of any Junior Stock and subject to the rights of the holders of any Senior Stock or Parity Stock and the rights of the Issuer’s existing and future creditors, to receive in full a liquidating distribution in cash and in the amount per share of Series A Preferred Stock equal to the greater of (i) the Liquidation Preference and (ii) the amount such holders would have received had such holders, immediately prior to such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Issuer, converted such shares of Series A Preferred Stock into Common Stock.

Redemption Rights

The Certificate of Designations provides that if there is a Change of Control (as defined in the Certificate of Designations), holders of Series A Preferred Stock have the right to require the Issuer to repurchase some or all of such holder’s Series A Preferred Stock for a cash purchase price equal to the fair market value of the property such holder would have received in respect of the number of shares of Common Stock that would have been issuable upon conversion of such share of Series A Preferred Stock in connection with the Change of Control (the “Change of Control Price”).  Further, if a Change of Control occurs in which the Change of Control Price exceeds 150% of the Liquidation Preference of a share of Series A Preferred Stock, the Issuer may redeem all, but not less than all, of the outstanding shares of Series A Preferred Stock for an amount in cash equal to the greater of (i) 100% of the Liquidation Preference and (ii) the Change of Control Price.

The Series A Preferred Stock will be redeemable, in whole or in part, at the option of the Issuer at any time:

In case of any redemption of only part of the shares of the Series A Preferred Stock at the time outstanding, the shares to be redeemed will be selected pro rata among holders. The Issuer will only be permitted to redeem the Series A Preferred Stock in part if (i) the aggregate cash redemption price is at least $5 million and (ii) immediately following such partial redemption, (a) Conversant Capital and its affiliates beneficially own at least 17% of the outstanding shares of Common Stock on an as-converted basis, or (b) no shares of Series A Preferred Stock will remain outstanding.

Investor Rights Agreement

On November 3, 2021, the Issuer, the Conversant Investors and Silk Partners, LP (“Silk”) entered into an investor rights agreement (the “Investor Rights Agreement”) providing for certain rights and obligations of the parties in connection with the Conversant Investors’ and Silk’s investment and the governance of the Issuer, including the designation of directors to the Board.

Board Designation Rights

The Investor Rights Agreement provides that for so long as Conversant Investors (together with their affiliates and permitted transferees, “Conversant Parties”) beneficially own:

If, after the date that is forty-two (42) months after the Closing Date, the Conversant Parties own any shares of Series A Preferred Stock and beneficially own more than 50% of the outstanding shares of Common Stock of the Issuer on an as-converted basis, then the Conversant Investors have the right to designate five (5) designees for inclusion in the Issuer’s slate of individuals nominated for election to the Board (which slate will include a number of nominees equal to the number of director positons to be filled).

Additionally, for so long as the Conversant Parties beneficially own at least 20% of the outstanding shares of Common Stock of the Issuer on an as converted basis, the Conversant Investors are entitled to designate the chairperson of the Board.

For so long as Silk together with its affiliates (the “Silk Parties”) beneficially own at least 5% of the outstanding shares of Common Stock of the Issuer on a converted basis, Silk will have the right to designate two (2) designees for inclusion in the Issuer’s slate of individuals nominated for election to the Board of Directors (which slate will include a number of nominees equal to the number of director positions to be filled).

Transfer Restrictions and Standstill

The Investor Rights Agreement contains prohibitions on the ability of the Conversant Investors to transfer any shares of Series A Preferred Stock (or shares of Common Stock issued upon conversion thereof) prior to the second anniversary of the Closing Date, other than (a) certain permitted transfers to affiliates, (b) in connection with a sale of the Issuer approved by the Board, (c) in connection with a sale to the Issuer, (d) a tender offer into which a majority of the unaffiliated stockholders of the Issuer have tendered their shares of Common Stock, or (e) to the Issuer or following a voluntary filing by the Issuer of a petition for relief under the United States Bankruptcy Code. In addition, prior to the third anniversary of the Closing Date, the Conversant Investors are prohibited from transferring any shares of Series A Preferred Stock (or shares of Common Stock issued upon conversion thereof) to certain designated competitors of the Issuer.

Pursuant to the Investor Rights Agreement, the Conversant Investors and their respective affiliates are restricted for a period of two years from the Closing Date, among other things and subject to certain exceptions, acquiring any securities of the Issuer or taking any actions to change the composition of the Board (other than in respect of their representatives designated for election to the Board).

Consent Rights

For so long as the Conversant Investors, together with their affiliates and permitted transferees, continue to beneficially own at least 15% of the outstanding shares of Common Stock on an as-converted basis, the Issuer is required to obtain Investor A’s prior written consent for any of the following actions (with such consent not to be unreasonably withheld, conditioned or delayed): (i) materially changing the principal business of the Issuer or entering into new lines of business or exiting the Issuer’s current line of business; (ii) agreeing to or consummating acquisitions involving the payment of money or assets in an amount exceeding $10 million; (iii) issuing equity securities representing 20% or more of the value of the outstanding shares of Common Stock on an as converted basis as of the date of the Investment Agreement, or 20% or more of the number of outstanding shares of Common Stock on an as converted basis as of the date of the Investment Agreement, in each case after taking into account the issuances in connection with the closing of the Investment Agreement and the Issuer’s rights offering; (iv) selling or otherwise transferring equity securities of any subsidiary of the Issuer to a person other than the Issuer or a wholly owned subsidiary; (v) agreeing to or consummating a change of control; (vi) consummating any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Issuer or filing a petition under bankruptcy or insolvency law; (vii) purchasing or redeeming or making any distribution or declaring any dividend on equity securities of the Issuer or any of its subsidiaries ranking junior to the Series A Preferred Stock other than (A) redemptions of or dividends or distributions on the Series A Preferred Stock or in which the Series A Preferred Stock participates pursuant to the Certificate of Designations, (B) dividends or other distributions payable on the Common Stock solely in the form of additional shares of Common Stock, (C) repurchases or redemptions if at such time any accrued dividends on the Series A Preferred Stock have been paid in full in cash; (viii) other than refinancings of existing indebtedness on substantially the same commercial economic terms, for any given calendar year, incurring indebtedness such that the aggregate amount of indebtedness of the Issuer and its subsidiaries immediately after such incurrence is in excess of 105% of the aggregate amount of indebtedness of the Issuer and its subsidiaries in the prior calendar year as of December 31; and (ix) authorizing or issuing any Parity Stock, additional shares of Series A Preferred Stock or Senior Stock.

Preemptive Rights

So long as the Conversant Investors together with their respective affiliates and permitted transferees hold at least 14.9% of the outstanding shares of Common Stock of the Issuer on an as-converted basis, the Conversant Investors are entitled to pre-emptive rights with respect to certain issuances of equity securities of Issuer, subject to customary exceptions.

Registration Rights Agreement

On November 3, 2021, the Issuer and the Conversant Investors entered into a registration rights agreement (the “Registration Rights Agreement”), pursuant to which among other things, the Issuer will be obligated to prepare and file, no later than 90 days prior to the second anniversary of the Closing Date, a shelf registration statement registering the shares of Common Stock issued to  the Conversant Investors pursuant to the A&R Investment Agreement (including shares of Common Stock issuable upon conversion of shares of Series A Preferred Stock and exercise of the Warrants) (the “Registrable Securities”), and the Issuer will use its reasonable best efforts to keep such registration statement effective at all times until such date as the Conversant Investors collectively beneficially own less than 15% of the outstanding shares of Common Stock on an as-converted basis. In addition, pursuant to the terms of the Registration Rights Agreement and subject to certain requirements and customary conditions, the Conversant Investors will be permitted to make one demand that the Issuer file a registration statement on Form S-3, or if not available, on Form S-1 to register the Registrable Securities and within any 12 month period, one demand that the Issuer consummate a “takedown” off of any such registration statement. The Registration Rights Agreement also provides the Conversant Investors and their affiliates with “piggy-back” registration rights.

The Conversant Investors are parties to the following Agreements with respect to the investment discussed in this Schedule 13D and any amendments hereto:  (i) the Investment Agreement, a copy of which is filed as Exhibit 1 to this Schedule 13D, (ii) the Investor Rights Agreement, a copy of which is filed as Exhibit 3 to this Schedule 13D and (iii) the Registration Rights Agreement, a copy of which is files as Exhibit 4 to this Schedule 13D, each of which is incorporated by reference herein.

The Reporting Persons are parties to an agreement with respect to the joint filing of this Schedule 13D and any amendments hereto. A copy of such agreement is attached as Exhibit 99.1 to this Schedule 13D and is incorporated by reference herein.