Item
1.01. Entry into a Material Definitive Agreement.
On
May 15, 2023, Ocean Biomedical, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “SPA”)
with an accredited investor (the “Investor”) for the sale of up to three Senior Secured Convertible Notes (each,
a “Note” and collectively, the “Notes”), which Notes are convertible into shares
of the Company’s common stock, $0.0001 par value per share (the “Common Stock”), in an aggregate principal
amount of up to $27,000,000, in a private placement (the “Offering”). The Company expects to consummate the
closing for the sale of (i) the initial Note in the principal amount of $7,560,000 and (ii) a warrant to initially acquire up to 552,141
additional shares of Common Stock with an initial exercise price of $11.50 per share of Common Stock, exercisable immediately and
expiring five years from the date of issuance (the “Warrant”), which is subject to customary closing conditions,
on or about May 22, 2023. The Notes will be sold at an original issue discount of eight percent (8%).
The
Company estimates that the net cash proceeds will be approximately $6,100,000 from the issuance of the initial Note and Warrant,
after deducting the original issue discount and the estimated expenses of the Offering. $1,000,000 shall be subject to a deposit account
control agreement.
SPA
The
SPA contains certain representations and warranties, covenants and indemnities customary for similar transactions. Under the SPA, the
Company also agreed to the following additional covenants:
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Until
the later of (x) the Additional Closing Expiration Date, and (y) the Applicable Date and at any time thereafter while any Registration
Statement is not effective or the prospectus contained therein is not available for use or any Current Public Information Failure
(as defined in the Registration Rights Agreement) exists, the Company shall not file a registration statement or an offering statement
under the 1933 Act relating to securities that are not the Registrable Securities (other than a registration statement on Form S-8
or such supplements or amendments to registration statements that are outstanding and have been declared effective by the SEC as
of the date hereof (solely to the extent necessary to keep such registration statements effective and available and not with respect
to any Subsequent Placement)). |
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So
long as any Notes remain outstanding, the Company and each Subsidiary is prohibited from effecting or entering into an agreement
to effect any Subsequent Placement involving a Variable Rate Transaction, other than an equity line of credit pursuant to that certain
Common Stock Purchase Agreement by and between the Company and White Lion Capital LLC, dated September 7, 2022, and all documents
executed in connection therewith. |
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The
Company is required to obtain Stockholder Approval authorizing the issuance of all of the Securities in compliance with the rules
and regulations of the Principal Market (without regard to any limitations on conversion or exercise set forth in the Notes or Warrants,
respectively) (including, without limitation, Securities to be issued in connection with any Additional Closing hereunder). |
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The
Company will use the proceeds from the sale of the Securities for general corporate purposes and, subject to the Company’s
compliance with Section 7(a)(xxiii) of the SPA, for payment of the transaction costs related to the Company’s De-SPAC transaction
with Aesther Healthcare Acquisition Corp., but not, directly or indirectly, for (i) other than certain exceptions, the satisfaction
of any indebtedness of the Company or any of its Subsidiaries (including, without limitation, any amounts in excess of $3 million
owed to any person in connection with the Business Combination) until the 15th Trading Day after the Applicable Date, (ii) the redemption
or repurchase of any securities of the Company or any of its Subsidiaries or (iii) the settlement of any outstanding litigation. |
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So
long as any of the Notes or Warrants remain outstanding, the Company shall take all action necessary to at all times have authorized,
and reserved for the purpose of issuance, no less than (i) 100% of the maximum number of shares of Common Stock issuable upon conversion
of all the Notes then outstanding, and (ii) 100% of the maximum number of Warrant Shares issuable upon exercise of all the Warrants
then outstanding; provided that at no time shall the number of shares of Common Stock reserved be reduced other than proportionally
in connection with any conversion, exercise and/or redemption, as applicable of Notes and Warrants. |
In
addition, under the SPA, the Company granted the purchasers in the Offering participation rights in future offerings of any equity security
or any equity-linked or related security (including, without limitation, any “equity security” as that term is defined under
Rule 405 promulgated under the 1933 Act), any Convertible Securities, any debt, any preferred stock or any purchase rights, during the
two years after the closing for the first Note. In the case of any offering of indebtedness, in an amount of up to 100% of the securities
being sold in such offering. In the case of any other offering, 35% of the Offered Securities, provided that the number of Offered Securities
which such Buyer shall have the right to subscribe for shall be (x) based on such Buyer’s pro rata portion of the aggregate original
principal amount of the Notes purchased hereunder by all Buyers (the “Basic Amount”), and (y) with respect to each Buyer
that elects to purchase its Basic Amount, any additional portion of the Offered Securities attributable to the Basic Amounts of other
Buyers as such Buyer shall indicate it will purchase or acquire should the other Buyers subscribe for less than their Basic Amounts (the
“Undersubscription Amount”), which process shall be repeated until each Buyer shall have an opportunity to subscribe for
any remaining Undersubscription Amount.
Convertible
Note
As
noted above, the issuance of each Note is subject to customary closing conditions. The form of Note that is an exhibit to the SPA contains
the following terms and conditions, all of which are expected to be included in each Note when issued.
General.
The Interest Rate applicable to each Note is, as of any date of determination, the lesser of (I) eight percent (8%) per annum and (II)
the greater of (x) five percent (5%) per annum and (y) the sum of (A) the Secured Overnight Financing Rate in effect as of such date
of determination and (B) two percent (2%) per annum; provided, further, that each of the forgoing rates shall be subject to adjustment
from time to time in accordance with the SPA. Each Note will mature on the first anniversary of its issuance (the “Maturity
Date”). Additionally, each Note is required to be senior to all the Company’s other indebtedness, other than certain
Permitted Indebtedness.
Security.
Each Note will be secured by all the Company’s existing and future assets (including those of the Company’s significant subsidiaries),
pursuant to a Security and Pledge Agreement (the “Security Agreement”) by and between the Company and certain
of its subsidiaries (the “Subsidiaries”) and Investor, as the collateral agent (the “Agent”).
Guaranty.
The obligations under each Note will be guaranteed by all of the Company’s existing and future subsidiaries, pursuant to a guaranty
by and between the Subsidiaries and the Agent (the “Guaranty”).
Voluntary
Conversion. All or any portion of the principal amount of each Note, plus accrued and unpaid interest, any late charges thereon and
any other unpaid amounts, is convertible at any time, in whole or in part, at the noteholder’s option, into shares of the Company’s
common stock at an initial fixed conversion price of $10.34 per share, subject to certain adjustments.
Alternate
Conversion. At any time during an Event of Default Redemption Right Period (as defined in each Note), a noteholder may alternatively
elect to convert all or any portion of the Conversion Amount into shares of common stock at an Alternate Conversion Price equal to the
lower of (i) the applicable Conversion Price as in effect on the applicable Conversion Date of the applicable Alternate Conversion and
(ii) the greater of (x) the Floor Price and (y) the lowest of (A) 80% of the VWAP of the Common Stock as of the Trading Day immediately
preceding the delivery or deemed delivery of the applicable Conversion Notice, (B) ) 80% of the VWAP of the Common Stock as of the Trading
Day immediately preceding the date of the occurrence of such applicable Event of Default, (C) 80% of the VWAP of the Common Stock as
of the Trading Day immediately preceding the delivery or deemed delivery of the applicable Conversion Notice, and (D) 80% of the price
computed as the quotient of (I) the sum of the VWAP of the Common Stock for each of the three (3) Trading Days with the lowest VWAP of
the Common Stock during the twenty (20) consecutive Trading Day period ending and including the Trading Day immediately preceding the
delivery or deemed delivery of the applicable Conversion Notice, divided by (II) two (2).
Installments.
On the first Trading Day of the calendar month immediately following the Initial Installment Trigger Date, on the first Trading Day of
the calendar month immediately following each previous Installment Date, and on the Maturity Date (each, an “Installment
Date”), the Company will make a payment on each Note in an amount equal to the sum of (A) (i) with respect to any Installment
Date other than the Maturity Date, the lesser of (x) the quotient of (I) the Outstanding Principal Value of the Note as of the initial
Installment Date, divided by (II) the number of Installment Dates occurring under the Note (as determined as of the initial Installment
Date assuming no Deferrals, Reallocations, Accelerations, redemptions or conversions under the Note prior to the Maturity Date) and (y)
Outstanding Principal Value of the Note as of such Installment Date, and (ii) with respect to the Installment Date that is the Maturity
Date, the Outstanding Principal Value of the Note then outstanding under the Note as of such Installment Date (in each case, as any such
Installment Amount may be reduced pursuant to the terms of the Note, whether upon conversion, redemption or Deferral), (B) any Deferral
Amount deferred pursuant to the Note and included in such Installment Amount in accordance therewith, (C) any Acceleration Amount accelerated
pursuant to the Note and included in such Installment Amount in accordance therewith, (D) any other unpaid amounts (excluding amounts
outstanding under the Notes) as of such Installment Date pursuant to the Transaction Documents, if any, and (E) in each case of clauses
(A) through (C) above, the sum of any accrued and unpaid Interest as of such Installment Date under the Note, if any, and accrued and
unpaid Late Charges, if any, under the Note as of such Installment Date. Each payment will be satisfied, at the Company’s election,
in shares of the Company’s common stock, subject to certain customary equity conditions (the “Equity Conditions”),
at 100% of the Installment Amount (an “Installment Conversion”) or otherwise (or at the Company’s option,
in whole or in part) in cash at 100% (or 110% if the Company has sold any securities in a Variable Price Transaction pursuant to any
equity line of credit or at-the-market offering after the Issuance Date) of the Installment Amount (an “Installment Redemption”).
If the Company effects an Installment Conversion, the Company will convert all or a portion of the Installment Amount into shares of
the Company’s common stock at an Installment Conversion Price equal to the lower of (i) the Conversion Price then in effect, and
(ii) the greater of (x) the Floor Price in effect and (y) the lowest of (I) 90% of the VWAP of the Common Stock as of the Trading Day
immediately prior to the applicable Installment Date; and (II) 90% of the quotient of (A) the sum of the VWAP of the Common Stock for
each of the three (3) Trading Days with the lowest VWAP of the Common Stock during the twenty (20) consecutive Trading Day period ending
and including the Trading Day immediately prior to the applicable Installment Date, divided by (B) three (3).
Deferral.
A noteholder may, at its election, defer the payment of all or any portion of the Installment Amount due on any Installment Date to another
Installment Date.
Acceleration.
On any day during the period starting on an Installment Date and ending on the trading day immediately prior to the next Installment
Date (each, an “Installment Period”), a noteholder may, at its election, accelerate the conversion of other
Installment Amounts at an Acceleration Conversion Price equal to the lower of (i) the Installment Conversion Price for such Current Installment
Date related to such Acceleration Date and (ii) the greater of (x) the Floor Price and (y) the lesser of (I) 90% of the quotient of the
VWAP of the Common Stock as of the Trading Day immediately prior to such Acceleration Date and (II) 90% of the quotient of (A) the sum
of the VWAP of the Common Stock for each of the three (3) Trading Days with the lowest VWAP of the Common Stock during the twenty (20)
consecutive Trading Day period ending and including the Trading Day immediately prior to such Acceleration Date, divided by (B) three
(3); and (III) solely respect to any Deferral Amount subject to an Acceleration, the lowest Acceleration Conversion Price of any Installment
Date in which such Deferral Amount has been Deferred under the Note (each, a “Current Acceleration Conversion Price”),
shall replace such Current Acceleration Conversion Price for any Acceleration of such Deferral Amount under the Note.
Reallocation.
A noteholder may, at its election, reallocate all or any portion of the Installment Amount for an Installment Date to a later date during
the Installment Period, with such reallocated amount converted at a reallocation conversion price per share equal to the lower of: (i)
the Conversion Price then in effect, and (ii) the lower of (I) the Installment Conversion Price for such applicable Installment Period,
and (II) the greater of (x) the Floor Price and (y) the lower of (A) 90% of the VWAP of the Common Stock on the Trading Day immediately
prior to the applicable Reallocation Date and (B) 90% of the quotient of (X) the sum of the VWAP of the Common Stock for each of the
three (3) Trading Days with the lowest VWAP of the Common Stock during the twenty (20) consecutive Trading Day period ending and including
the Trading Day immediately prior to the applicable Reallocation Date, divided by (Y) three (3).
Change
of Control. Upon a Change of Control (as defined in each Note), a noteholder may require the Company to redeem all, or any portion,
of the Note at a price equal to the greater of: (i) the product of (w) 115% multiplied by (y) the Conversion Amount being redeemed, (ii)
the product of (x) 115% multiplied by (y) the product of (A) the Conversion Amount being redeemed multiplied by (B) the quotient determined
by dividing (I) the greatest Closing Sale Price of the shares of Common Stock during the period beginning on the date immediately preceding
the earlier to occur of (1) the consummation of the applicable Change of Control and (2) the public announcement of such Change of Control
and ending on the date the Holder delivers the Change of Control Redemption Notice by (II) the Alternate Conversion Price then in effect
and (iii) the product of (y) 115% multiplied by (z) the product of (A) the Conversion Amount being redeemed multiplied by (B) the quotient
of (I) the aggregate cash consideration and the aggregate cash value of any non-cash consideration per share of Common Stock to be paid
to the holders of the shares of Common Stock upon consummation of such Change of Control (any such non-cash consideration constituting
publicly-traded securities shall be valued at the highest of the Closing Sale Price of such securities as of the Trading Day immediately
prior to the consummation of such Change of Control, the Closing Sale Price of such securities on the Trading Day immediately following
the public announcement of such proposed Change of Control and the Closing Sale Price of such securities on the Trading Day immediately
prior to the public announcement of such proposed Change of Control) divided by (II) the Conversion Price then in effect.
Beneficial
Ownership Limitation. A noteholder will not have the right to convert any portion of a Note, to the extent that, after giving effect
to such conversion, the noteholder (together with certain of its affiliates and other related parties) would beneficially own in excess
of 9.99% of the shares of the Company’s common stock outstanding immediately after giving effect to such conversion (the “Maximum
Percentage”). The noteholder may from time to time increase (with such increase not effective until the sixty-first (61st)
day after delivery of such notice) or decrease the Maximum Percentage, which in no event may exceed 9.99%.
Nasdaq
Limitation. Unless the Company obtains the approval of its stockholders as required by Nasdaq, the Company will be prohibited from
issuing any shares of common stock upon conversion of the Note or otherwise pursuant to the terms of the Note, if the issuance of such
shares of common stock would exceed 19.99% of the Company’s outstanding shares of common stock as of the date of the SPA or otherwise
exceed the aggregate number of shares of common stock which the Company may issue without breaching the Company’s obligations under
the rules and regulations of Nasdaq.
Events
of Default. The Note provides for certain Events of Default, including, among other things, any breach of the covenants described
below and any failure of Dr. Chirinjeev Kathuria to be the chairman of the board of directors of the Company. In connection with an Event
of Default, the noteholder may require the Company to redeem all or any portion of the Note, at a price equal to the greater of (i) the
product of (A) the Conversion Amount to be redeemed multiplied by (B) 115% and (ii) the product of (X) the Conversion Rate (using the
Alternate Conversion Price then in effect) with respect to the Conversion Amount in effect at such time as the Holder delivers an Event
of Default Redemption Notice multiplied by (Y) the product of (1) 115% multiplied by (2) the greatest Closing Sale Price of the Common
Stock on any Trading Day during the period commencing on the date immediately preceding such Event of Default and ending on the date
the Company makes the entire payment required to be made.
Covenants.
The Company will be subject to certain customary affirmative and negative covenants regarding the rank of the Notes, the incurrence of
indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of
dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates,
among other customary matters. The Company also will be subject to financial covenants requiring that (i) the amount of the Company’s
available cash equal or exceed (x) prior to the First Additional Closing Date, as defined in the SPA, $1 million or (y) after the First
Additional Closing Date, $2.5 million; (ii) the ratio of (a) the outstanding principal amount of the Notes, accrued and unpaid interest
thereon and accrued and unpaid late charges to (b) the Company’s average market capitalization over the prior ten trading days,
not exceed 35%; and (iii) at any time any Notes remain outstanding, with respect to any given calendar month (each, a “Current
Calendar Month”) (x) the Available Cash on the last calendar day in such Current Calendar Month shall be greater than or
equal to the Available Cash on the last calendar day of the month prior to such Current Calendar Month less $1.5 million.
Registration
Rights Agreement
In
connection with the issuance of the Note, the Company will enter into a registration rights agreement in a form to be mutually agreed
(the “Registration Rights Agreement”), pursuant to which the Company will grant certain registration rights
to the noteholder.
Additional
Information
The
form of Note, Warrant, Guaranty, Security Agreement, SPA and Registration Rights Agreement are attached hereto as Exhibits
10.1, 10.2, 10.3, 10.4, 10.5 and 10.6, respectively, and are incorporated herein by reference. The foregoing description
of the Offering and the documentation related thereto does not purport to be complete and is qualified in its entirety by reference to
such exhibits.
The
form of Note, Warrant, Guaranty, Security Agreement, SPA and Registration Rights Agreement have been included to provide
investors and security holders with information regarding their terms. The documents are not intended to provide any other factual information
about the Company. The representations, warranties and covenants contained in the form of Note, Warrant, Guaranty, Security Agreement,
SPA and Registration Rights Agreement are being made only for purposes of such agreements and as of specific dates, were solely for the
benefit of the parties to such agreements, may in some cases be made solely for the allocation of risk between the parties and may be
subject to limitations agreed upon by the contracting parties.
All
capitalized terms used above in this Current Report on Form 8-K and not otherwise defined herein have the meanings ascribed to such terms
in the SPA and related transaction documents, as applicable.