The Promissory Note for the Pre-Paid Advance will be due 15 months from the date of issuance, and interest shall accrue on the outstanding balance of the Promissory Note at an annual rate equal to 6%, subject to an increase to 18% upon an event of default as described in the Promissory Note. The Promissory Note shall be convertible by the Investor into shares of Common Stock at the Conversion Price (as defined below). The number of shares of Common Stock issuable upon conversion of any amount of principal being converted (the “Conversion Amount”) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price. The “Conversion Price” is the lower of (a) 110% of the daily VWAP of the Common Stock on The Nasdaq Stock Market, LLC (“Nasdaq”) as of the trading day immediately prior to the issuance of the Promissory Note (the “Fixed Price”), or (b) 95% of the lowest daily VWAP of the Common Stock on Nasdaq during the five consecutive trading days immediately prior to (i) each date of conversion or (ii) the date the Investor submits an Investor Notice to QTI Holdings that it intends to make a purchase (the “Variable Price”), but which Variable Price shall not be lower than the Floor Price then in effect. The “Floor Price” solely with respect to the Variable Price, means the lower of (i) $2.00 per share or (ii) the VWAP of the Common Stock for the five (5) trading days immediately prior to the Resale Registration Statement (as defined below) being declared effective by the SEC (as defined below), or as reduced in accordance with the terms of the Promissory Note. Notwithstanding the foregoing, QTI Holdings may reduce the Floor Price to any amounts set forth in a written notice to the Investor; provided that such reduction shall be irrevocable and shall not be subject to increase thereafter.
QTI Holdings at its option shall have the right, but not the obligation, to redeem (“Optional Redemption”) early a portion or all amounts outstanding under the Promissory Note; provided that (i) QTI Holdings provides the Investor with no less than ten (10) trading days’ prior written notice (each, a “Redemption Notice”) of its desire to exercise an Optional Redemption and (ii) on the date the Redemption Notice is issued, the VWAP of the Common Stock is less than the Fixed Price. Each Redemption Notice shall be irrevocable and shall specify the outstanding balance of the Note to be redeemed and the Redemption Amount. The “Redemption Amount” shall be equal to the outstanding principal balance being redeemed by QTI Holdings, plus the Redemption Premium (as defined below), plus all accrued and unpaid interest. After receipt of the Redemption Notice, the Investor shall have ten (10) trading days to elect to convert all or any portion of the Promissory Note. On the eleventh (11th) trading day after the Redemption Notice, QTI Holdings shall deliver to the Investor the Redemption Amount with respect to the principal amount redeemed after giving effect to conversions effected during the ten (10) trading day period.
Under the terms of the Promissory Note, a Trigger Event shall occur if (i) the daily VWAP is less than the Floor Price for five trading days during a period of seven consecutive trading days (a “Floor Price Trigger”), or (ii) GigCapital5 has issued in excess of 95% of the Common Stock available under the Exchange Cap (as defined below) (an “Exchange Cap Trigger”) (the last such day of each such occurrence, a “Trigger Date”). If, at any time six months after the issuance of the Promissory Note, a Trigger Event occurs, then QTI Holdings will be obligated to make monthly payments in an amount equal to the sum of (i) $1,500,000 of principal in the aggregate among all promissory notes issued to the Investor (or the outstanding principal if less than such amount) (the “Triggered Principal Amount”), plus (ii) a payment premium of 5% in respect of such Triggered Principal Amount, and (iii) accrued and unpaid interest hereunder as of each payment date beginning on the 5th Trading Day after the Trigger Date and continuing on the same day of each successive calendar month to the Investor pursuant to the terms of the Promissory Note. However, in the event that QTI Holdings shall be required to make such cash payments to the Investor under the Promissory Note as a result of the occurrence of a Trigger Event, QTI Holdings shall be entitled upon written notice to the Investor, to direct that the Investor (i) if the Investor has sold the Company Shares, to apply, in accordance with the terms of the Promissory Note, up to fifty percent (50%) of the Investor’s net sale proceeds of the Company Shares to satisfy, in part or in whole, the Triggered Principal Amount of such cash payments due to the Investor or (ii) or if the Investor has not sold the Company Shares, to apply up to fifty percent (50%) of the value of the Company Shares on such date the cash payment is due based on the VWAP (as such term is defined in the SEPA) as quoted by Bloomberg LP of the Company Shares as an offset of the Triggered Principal Amount of the cash payments due to the Investor. QTI Holdings’ right to request that the Investor apply or offset cash payments to which the Investor is entitled pursuant to the Promissory Note shall cease once fifty percent (50%) of the (i) the net sale proceeds of the Company Shares or fifty percent (50%) of the value of the Company Shares on such date the cash payment is due based on the VWAP as quoted by Bloomberg LP of the Company Shares have been applied or offset as provided herein to such cash payments to which the Investor is entitled. The obligation of QTI Holdings to make monthly prepayments shall cease (with respect to any payment that has not yet come due) if any time after the Trigger Date (a) QTI Holdings reduces the Floor Price to an amount that is at least 50% of the daily VWAP of the Common Stock, (b) the daily VWAP is greater than the 110% of the Floor Price a period of five consecutive trading days in the event of a Floor Price Trigger, or (c) the date GigCapital5 has obtained stockholder approval to increase the number of shares of Common Stock under the Exchange Cap and/or the Exchange Cap no longer applies, unless a subsequent Trigger Event occurs. Furthermore, within one (1) trading day of a Floor Price Trigger that remains after application of all amounts related to the Company Shares as described above, QTI Holdings shall reduce the Floor Price to an amount that is at least fifty percent (50%) of the daily VWAP of the Common Stock, and provide the Investor written confirmation of such reduction of the Floor Price or be obligated to make the above monthly cash payments.
The foregoing description is only a summary of the SEPA, including the form of Promissory Note attached as an exhibit to the SEPA, and is qualified in its entirety by reference to the full text of the SEPA and the form of Promissory Note attached as an exhibit to the SEPA, which is filed as Exhibit 10.1 hereto and incorporated by reference herein.
Registration Rights Agreement
In connection with the entry of the SEPA, GigCapital5 entered into a Registration Rights Agreement with the Investor (the “Registration Rights Agreement”) on November 16, 2023, pursuant to which QTI Holdings agrees to file within 21 calendar days of the date of the Pre-Advance Closing, a registration statement on Form S-1 (or Forms S-3, if eligible) with the Securities and Exchange Commission (the “SEC”) covering the resale of the Common Stock subject to the SEPA requested to be included in such registration statement (the “Resale Registration Statement”), and QTI Holdings shall use its best efforts to have the Resale Registration Statement declared effective as soon as practicable after the filing thereof, but in no event later than (a) the 45th calendar day following the filing of the Resale Registration Statement or (b), the fifth business day following the date on which QTI Holdings is notified by the SEC that the Resale Registration Statement will not be or is no longer subject to further review and comments.
The foregoing description is only a summary of the Registration Rights Agreement and is qualified in its entirety by reference to the full text of the Registration Rights Agreement, which is filed as Exhibit 10.2 hereto and incorporated by reference herein.
Item 2.03 |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
The disclosure set forth above in Item 1.01 of this Current Report on Form 8-K under “Pre-Paid Advance” is incorporated herein by reference.
Item 3.02 |
Unregistered Sales of Equity Securities. |
The disclosure set forth above in Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference. The securities of GigCapital5 that may be issued in connection with the SEPA will not be registered under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.
Important Information and Where to Find It
In connection with the proposed Business Combination, GigCapital5 filed with the SEC a registration statement on Form S-4 (together with all amendment to such registration statement, the “Registration Statement”), which includes a preliminary proxy statement/prospectus (the “BCA Proxy Statement”) to be distributed to holders of GigCapital5 Common Stock in connection with GigCapital5’s solicitation of proxies for the vote by GigCapital5’s stockholders with respect to the Business Combination and the other matters as described in the Registration Statement and a prospectus relating to the offer of the securities to be issued to the stockholders of QT Imaging in