Item 1.01. Entry into a Material Definitive Agreement
On April 6, 2021, Mountain
Crest Acquisition Corp. II, a Delaware corporation (“MCAD”) entered into an agreement and plan of merger (as it may
be amended or restated from time to time the “Merger Agreement”), by and among MCAD Merger Sub Inc., a Delaware corporation
and wholly owned subsidiary of MCAD (“Merger Sub”), and Better Therapeutics, Inc. a Delaware corporation (“BTX”).
The Merger Agreement was unanimously
approved by MCAD’s board of directors on March 29, 2021. Pursuant to the terms of the Merger Agreement, at the closing of the transactions
contemplated thereby, Merger Sub will merge with and into BTX (the “Merger” or “Business Combination”),
with BTX being the surviving corporation and following the merger BTX will be a wholly owned subsidiary of MCAD. In connection with the
Business Combination, MCAD shall be renamed “Better Therapeutics, Inc.”
Consideration
Under the Merger Agreement, MCAD has agreed to acquire all of the outstanding
shares of BTX common stock in exchange for 15,000,000 shares of MCAD’s common stock, par value $0.0001 per share (“MCAD
Common Stock”), subject to adjustment as explained below (the “Merger Consideration”). BTX shall deliver to MCAD,
two business days prior to the closing of the Merger (the “Closing”), the calculation of BTX’s net debt (the
“Net Debt”), by 8:00 PM Eastern Time (the “Net Debt Calculation Date”). Net Debt means, without
duplication, (i) the amount outstanding under the Paycheck Protection Program Loan Promissory Note dated May 9, 2020 issued by Celtic
Bank Corporation to BTX, minus (ii) the cash of BTX, in each case, as of the Net Debt Calculation Date. The Merger Consideration shall
be adjusted as follows to account for the Net Debt: (a) if Net Debt is greater than $0.00 (the “Net Debt Target”),
then the Merger Consideration shall be reduced at a rate of one share of MCAD Common Stock for each $10.00 increment that the Net Debt
is greater than the Net Debt Target; (b) if Net Debt is less than the Net Debt Target, then the Merger Consideration shall be increased
at a rate of one share of MCAD Common Stock for each $10.00 increment that the Net Debt is less than the Net Debt Target; or (c) if Net
Debt equals the Net Debt Target, then no adjustment will be made to the Merger Consideration. Any adjustment to the Merger Consideration
pursuant to this Section 2.2 shall be in whole shares of MCAD Common Stock and no adjustment shall be made for any divergence that is
in an increment of less than $10.00.
BTX shall also deliver to MCAD two business
days prior to the Closing, an equityholder allocation schedule setting forth each shareholder of BTX common stock (each a “BTX
Shareholder”), as of the Closing, and such BTX Shareholder’s percentage of the Merger Consideration.
On the date the Merger is
effective (the “Effective Time”) by virtue of the Merger and without any action on the part of MCAD, Merger Sub, BTX:
a. each
share of BTX common stock (other than BTX restricted stock) issued and outstanding immediately prior to the Effective Time shall be canceled
and automatically converted into such BTX Shareholder’s right to receive, without interest, the
number of shares of MCAD Common Stock equal to the product of (i) the number of shares of BTX common stock (other than BTX restricted
stock) held by such BTX Shareholder and (ii) the “Exchange Ratio”
determined by dividing (A) the Merger Consideration (after giving effect to the Net Debt adjustment, if any) by (B) the
issued and outstanding number of shares of BTX common stock as of the Closing;
b. each
BTX stock option (whether vested or unvested) that is outstanding and unexercised immediately prior to the Effective Time shall be assumed
by MCAD and automatically converted into an option to purchase shares of MCAD Common Stock (each an “Assumed Option”). The
number of shares of MCAD Common Stock (rounded down to the nearest whole share) that are subject to each Assumed Option shall be equal
to the product of (i) the number of shares of BTX common stock subject to the BTX stock option and (ii) the Exchange Ratio, and the exercise
price per share of the Assumed Option (rounded up to the nearest whole cent) shall be equal to the quotient obtained by dividing (A) the
exercise price per share of the BTX stock option by (B) the Exchange Ratio. Each Assumed Option will continue to be subject to the terms
and conditions set forth in the BTX stock option plan and its applicable grant agreement (except any references therein to BTX or shares
of BTX common stock will instead mean the MCAD and shares of MCAD Common Stock, respectively). MCAD shall take all corporate action necessary
to reserve for future issuance, and shall maintain such reservation for so long as any Assumed Options remain outstanding, a sufficient
number of shares of MCAD Common Stock for delivery upon the exercise of such Assumed Options.;
c. each
award of BTX restricted stock that is outstanding immediately prior to the Effective Time shall be assumed by MCAD and automatically converted
into an award of restricted MCAD Common Stock with the number of shares of MCAD Common Stock equal to the product of (i) the number of
shares of BTX restricted stock and (ii) the Exchange Ratio (the “Assumed Restricted Stock Award”). Each Assumed Restricted
Stock Award will continue to be subject to the terms and conditions set forth in the applicable restricted stock agreement (except any
references therein to BTX or shares of BTX common stock will instead mean the MCAD and shares of MCAD Common Stock, respectively); and
d. each share of common stock
of Merger Sub, par value $0.0001 per share issued and outstanding immediately prior to the Effective Time will be converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock, par value $0.001 per share, of the BTX, the surviving corporation
in the Merger.
MCAD Post-Closing Board of Directors and
Executive Officers
Immediately following the
Closing, MCAD’s board of directors will consist of no more than seven directors of which MCAD has the right to designate one director
and the remaining six directors will be designated by BTX. At Closing, all of the executive officers of MCAD shall resign and the individuals
serving as executive officers of MCAD immediately after the Closing will be the same individuals (in the same offices) as those of BTX
immediately prior to the Closing.
Shareholder Approval
As promptly as practicable
after the date of the Merger Agreement, MCAD will prepare and file with the Securities and Exchange Commission (the “SEC”)
a registration statement on Form S-4 which shall include proxy materials in the form of a proxy statement (as amended or supplemented
from time to time, the “Form S-4”) for the purpose of soliciting proxies from the shareholders of MCAD and solicit
proxies from such stockholders to among other things, vote in favor of the Merger Agreement and the other proposal set forth below at
a special meeting of the shareholders of MCAC (the “Special Meeting”) and to register certain securities of MCAD with the
SEC.
MCAD will seek
stockholder approval of the following proposals: (i) to consider and vote on a proposal to adopt and approve (a) the Agreement and
Plan of Merger, dated as of April 6, 2021 (the “Merger Agreement”), by and among MCAD, Merger Sub and BTX, and (b) the
Merger and the other transactions contemplated by the Merger Agreement (the “Merger Proposal”), (ii) to consider and
vote on a proposal to adopt the proposed amended and restate certificate of incorporation of MCAD (the “Charter Amendment
Proposal”), (iii) to consider and vote on, on a non-binding advisory basis, eight separate governance proposals relating to
the following material differences between MCAD’s current amended and restated certificate of incorporation and the proposed
amended and restated certificate of incorporation (collectively, the “Governance Proposal”), (iv) to consider and vote
on a proposal to approve, for purposes of complying with Nasdaq Rules 5635(a) and (b), the issuance of more than 20% of the issued
and outstanding MCAD common stock, $.0001 par value, and the resulting change in control in connection with the Merger and for the
purposes of complying with Nasdaq Rules 5635(d) the issuance of more than 20% of the issued and outstanding Common Stock in the PIPE
Investment (as defined in the Form S-4), upon the completion of the Merger (the “Nasdaq Proposal”); (v) to consider and
vote upon a proposal to elect, effective as of the consummation of the Merger certain directors to serve on the MCAD Board of
Directors (the “Directors Proposal”); (vi) to consider and vote on a proposal to approve the 2021 Equity Incentive Plan,
a copy of which will be included in the proxy statement mailed to shareholders (the “Incentive Plan Proposal”); (vii) to
consider and vote on a proposal to approve the 2021 Employee Stock Purchase Plan, a copy of which will be included in the proxy
statement mailed to shareholders (the “Employee Stock Purchase Plan Proposal”); and (viii) to approve a proposal to
adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based
upon the tabulated vote at the time of the Special Meeting, there are not sufficient votes to approve the Merger Proposal, the
Nasdaq Proposal, the Directors Proposal, the Charter Amendment Proposal or the Incentive Plan Proposals (the “Adjournment
Proposal” and collectively with the Merger Proposal, the Charter Amendment Proposal, the Governance Proposal the Nasdaq
Proposal, the Directors Proposal, the Incentive Plan Proposal, and the Employment Stock Purchase Plan Proposal, the “MCAD
Proposals”).
Closing
The Closing will be on a date
to be specified by MCAD and BTX, but in no event later than three business days following the satisfaction or waiver of all of the closing
conditions. It is expected that the Closing will occur in the late second or third quarter of 2021. The Merger Agreement includes an outside
Closing date of August 31, 2021.
Representations and Warranties; Covenants
MCAD, Merger Sub and BTX have
made customary representations, warranties and covenants in the Merger Agreement, including, among other things, covenants with respect
to the conduct of MCAD and BTX prior to the Closing. The parties have also agreed to customary “no shop” obligations, their
ability and authority to enter into the Merger Agreement and the capitalization of MCAD and BTX, respectively. The representations and
warranties of MCAD, Merger Sub and BTX will not survive the Closing of the Merger.
Conditions to Closing
The obligation of the parties
to consummate the Merger is conditioned on, among other things, the satisfaction or waiver (where permissible) by MCAD and BTX of the
following conditions, (a) the stockholders of both MCAD and BTX have approved the Merger, (b) the stockholders of MCAD have approved and
adopted the MCAD Proposals; (c) The representations and warranties of MCAD, Merger Sub and BTX set forth in the Merger Agreement are true
and correct in all material respects, as of its date and as of the Closing Date; (d) there shall have been no Material Adverse Effect
(as defined in the Merger Agreement) (e) after giving effect to all redemptions of MCAD Common Stock in connection with the Merger, the
net tangible assets held by MCAD shall be equal to at least $5,000,001; (f) the MCAD Common Stock to be issued in the Merger and pursuant
to the Subscription Agreements (as defined below) shall have been approved for listing on the Nasdaq Capital Market; (g) certain BTX Shareholders
have entered into a lock-up agreement and (h) the PIPE Financing discussed below shall have been consummated pursuant to the Subscription
Agreements.
Termination
The Merger Agreement may be
terminated at any time by MCAD or BTX under certain circumstances, including, among other things, (i) by mutual written consent of MCAD
and BTX; (ii) by either MCAD or BTX if the Closing has not occurred by August 31, 2021, (iii) by MCAD or BTX if MCAD has not obtained
the required approval by MCAD stockholders or if BTX has not obtained the required approval of BTX shareholders.
The foregoing summary of the
Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the actual Merger Agreement which is
filed with this Current Report on Form 8-K as Exhibit 2.1 and is incorporated herein by reference.
Additional Agreements to be Executed at
the Signing of the Merger Agreement
Parent
Support Agreement
Contemporaneously with the
execution of the Merger Agreement, certain holders of the MCAD Common Stock entered into the Parent Support Agreement, pursuant to which
such holders agreed to approve the Merger Agreement and the proposed Merger.
The foregoing description
of the Parent’s Support Agreement is qualified in its entirety by reference to the full text of Parent Support Agreement, a copy
of which is included as Exhibit 10.1 to this Current Report on Form 8-K, and incorporated herein by reference.
Company
Support Agreement
Contemporaneously with the
execution of the Merger Agreement, certain holders of BTX common stock entered into the Company Support Agreement, pursuant to which such
holders agreed to approve the Merger Agreement and the proposed Merger.
The foregoing description
of the Company Support Agreement is qualified in its entirety by reference to the full text of Company Support Agreement, a copy of which
is included as Exhibit 10.2 to this Current Report on Form 8-K, and incorporated herein by reference.
PIPE Subscription Agreements and PIPE Registration
Rights
In connection with the proposed
Merger, MCAD has obtained commitments from interested accredited investors (each a “Subscriber”) to purchase shares
of MCAD Common Stock which will be issued in connection with the Closing (the “PIPE Shares”), for an aggregate cash
amount of $50,000,000 at a purchase price of $10.00 per share, in a private placement (the “PIPE”). Certain offering
related expenses are payable by MCAD, including customary fees payable to the placement agents, Cowen. Such commitments are being made
by way of the Subscription Agreements (the “PIPE Subscription Agreements”), by and among each Subscriber and MCAD.
The purpose of the sale of the PIPE Shares is to raise additional capital for use in connection with the Merger and to meet the minimum
cash requirements provided in the Merger Agreement. The PIPE Shares are identical to the shares of MCAD Common Stock that will be held
by MCAD’s public stockholders at the time of the Closing, except that the PIPE Shares will not be entitled to any redemption rights
and will not be registered with the SEC. The closing of the sale of PIPE Shares (the “PIPE Closing”) will be contingent
upon the substantially concurrent consummation of the Merger. The PIPE Closing will occur on the date of, and immediately prior to, the
consummation of the Merger.
Pursuant to the PIPE Subscription
Agreement Agreements, MCAD has agreed to file (at MCAD’s sole cost and expense) a registration statement registering the resale
of the shares of common stock to be purchased in the private placement (the “PIPE Resale Registration Statement”) with
the Securities and Exchange Commission (the “SEC”) no later than thirty (30) calendar days following the Closing.
MCAD will use its commercially reasonable efforts to have the PIPE Resale Registration Statement declared effective as soon as practical
but no later than the earlier of (i) the 90th calendar day following the filing date thereof (in the event the SEC notifies MCAD
that it will “review” the PIPE Resale Registration Statement) and (ii) the 5th business day after the date MCAD is notified
by the SEC that the PIPE Resale Registration Statement will not be “reviewed” or will not be subject to further review. (The
rights set forth above granted to the Subscribers pursuant to the PIPE Subscription Agreements are defined as the “PIPE Registration
Rights”
Each PIPE Subscription Agreement
will terminate upon the earlier to occur of (i) such date and time as the Merger Agreement is terminated in accordance with its terms,
(ii) upon the mutual written agreement of each of the parties to the PIPE Subscription Agreements, (iii) any of the conditions to the
PIPE Closing are not satisfied or waived on or prior to the PIPE Closing and, as a result thereof, the transactions contemplated by the
Subscription Agreement are not consummated at the PIPE Closing or (iv) August 31, 2021.
The foregoing descriptions of the PIPE Subscription
Agreements and the PIPE Registration Rights contained therein are qualified in their entirety by reference to the full text of the Form
of the PIPE Subscription Agreement, a copy of which is included as Exhibit 10.3, to this Current Report on Form 8-K, and incorporated
herein by reference.
Additional Agreements to be Executed at Closing
Lock-Up Agreement
In connection with the Closing,
the BTX shareholders will each agree, subject to certain customary exceptions, not to (i) sell, offer to sell, contract or agree to sell,
pledge or otherwise dispose of, directly or indirectly, any shares of MCAD Common Stock held by them (such shares, together with any securities
convertible into or exchangeable for or representing the rights to receive shares of MCAD Common Stock if any, acquired during the Lock-Up
Period (as defined below), the “Lock-up Shares”), (ii) enter into a transaction that would have the same effect, (iii)
enter into any swap, hedge or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership
of the Lock-Up Shares or otherwise or engage in any short sales or other arrangement with respect to the Lock-Up Shares or (iv) publicly
announce any intention to effect any transaction specified in clause (i) or (ii) until the date that is 6 months after the Closing Date
(the “Lock-Up Period”).
The foregoing description
of the Lock-Up Agreement is qualified in its entirety by reference to the full text of the form of Lock-Up Agreement, a copy of which
is included as Exhibit 10.4 to this Current Report on Form 8-K, and incorporated herein by reference.
MCAD Amended and Restated Registration Rights Agreement
At the closing, MCAD will
enter into an amended and restated registration rights agreement (the “MCAD Amended and Restated Registration Rights Agreement”)
with certain existing stockholders of MCAD with respect to the shares of MCAD Common Stock they own at the Closing, and the BTX shareholders
of MCAD with respect to the Merger Consideration. The MCAD Amended and Restated Registration Rights Agreement will require MCAD to, among
other things, file a resale shelf registration statement on behalf of the stockholders no later than 60 days after the closing of the
Business Combination. The MCAD Amended and Restated Registration Rights Agreement will also provide certain demand registration rights
and piggyback registration rights to the stockholders, subject to underwriter cutbacks and issuer blackout periods. MCAD will agree to
pay certain fees and expenses relating to registrations under the MCAD Amended and Restated Registration Rights Agreement.
The foregoing description of the MCAD Amended and
Restated Registration Rights Agreement is qualified in its entirety by reference to the full text of the form of MCAD Amended and Restated
Registration Rights Agreement, a copy of which is included as Exhibit 10.5 to this Current Report on Form 8-K, and incorporated herein
by reference.