SMX (Security Matters) Public Ltd Co 20-F, filed Mar 13, 2023
SMX (Security Matters) Public Ltd Co (SMX)
About this 20-F
SMX (Security Matters) Public Ltd Co filed this 20-F on March 13, 2023, covering the fiscal year ended March 7, 2023.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
| ☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(B) OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
| ☐ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
OR
| ☒ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report: March 7, 2023
Commission File Number: 001-41639
SMX (Security Matters) Public Limited Company
(Exact name of Registrant as specified in its charter)
| Not applicable |
Ireland | |
| (Translation of Registrant’s name into English) | (Jurisdiction of incorporation or organization) |
Mespil Business Centre
Mespil House, Sussex Road
Dublin 4, Ireland, D04 T4A6
+353-1-920-1000
(Address of principal executive offices)
Haggai Alon
haggai@securitymattersltd.com
Mespil Business Centre
Mespil House, Sussex Road
Dublin 4, Ireland, D04 T4A6
Tel: +353-1-920-1000
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered | ||
| Class A Ordinary Shares, with a nominal value of $0.0001 per share | SMX | Nasdaq Stock Market LLC | ||
| Warrants, each exercisable for one Class A Ordinary Share at an exercise price of $11.50 per share | SMXWW | Nasdaq Stock Market LLC |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or ordinary shares as of the close of the period covered by the shell company report: 22,501,306 Class A Ordinary Shares, with a nominal value of $0.0001 per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☐
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| Non-accelerated filer | ☐ | Emerging growth company | ☒ | |||
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting over Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| US GAAP ☐ | International Financial Reporting Standards as issued | Other ☐ | ||||||
| by the International Accounting Standards Board ® ☒ |
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☐
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| Item 1. Identity of Directors, Senior Management and Advisers |
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| Item 11. Quantitative and Qualitative Disclosures about Market Risk |
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| Item 12. Description of Securities Other than Equity Securities |
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On March 7, 2023 (the “Closing Date”), SMX (Security Matters) Public Limited Company (formerly known as Empatan Public Limited Company), a public limited company incorporated in Ireland with registered number 722009 (the “Company” or “Parent”), consummated its previously announced business combination pursuant to the Business Combination Agreement, dated July 26, 2022 (the “Business Combination Agreement” or “BCA”), by and among the Company, Lionheart III Corp, a Delaware corporation (“Lionheart”), Security Matters Limited, an Australian public company with Australian Company Number (ACN) 626 192 998 listed on the Australian Stock Exchange (“Security Matters Limited”), and Aryeh Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”). Capitalized terms used in this section but not otherwise defined herein have the meanings given to them in the Business Combination Agreement.
On the Closing Date, Parent also consummated its previously announced Scheme of Implementation Deed (“SID”), dated July 26, 2022, by and among Parent, Lionheart, Security Matters Limited and Merger Sub.
Beginning on the day immediately prior to the Closing Date and finishing on the day immediately after the Closing Date, the following transactions occurred pursuant to the terms of the Business Combination Agreement (collectively, the “Business Combination”):
| • | Under the SID, Security Matters Limited proposed a scheme of arrangement under Part 5.1 of the Corporations Act (“Scheme”) and capital reduction (“Capital Reduction”) which resulted in all shares in Security Matters Limited being cancelled in return for the issuance of ordinary shares of Parent (“Parent Shares”), with Parent being issued one share in Security Matters Limited (“Security Matters Shares”) (this resulted in Security Matters Limited becoming a wholly owned subsidiary of Parent); |
| • | Under the SID, Security Matters Limited proposed an option scheme of arrangement under Part 5.1 of the Corporations Act (“Option Scheme”) which resulted in the Security Matters Limited options held by participants in the Option Scheme being subject to a cashless exercise based on a Black-Scholes valuation, in exchange for Security Matters Shares. Under the Scheme those shares were cancelled and the participants received Parent Shares on the basis of the Scheme consideration; |
| • | Security Matters Limited shareholders received consideration under the Scheme of 1 Parent Share per 10.3624 Security Matters Shares having an implied value of $10.00 per Parent Share and Parent became the holder of all of the issued shares in Security Matters Limited and Lionheart, with Security Matters Limited being delisted from the Australian Stock Exchange; |
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| • | Merger Sub merged with and into Lionheart, with Lionheart surviving the merger as a wholly owned subsidiary of Parent. |
| • | Existing Lionheart stockholders received Parent Shares in exchange for their existing Lionheart shares and existing Lionheart warrant holders had their warrants automatically adjusted to become exercisable in respect of Parent Shares instead of Lionheart shares (“Parent Warrants”). |
Except as otherwise indicated or required by context, references in this Report to “we,” “us,” “our,” “Parent” or the “Company” refer to SMX (Security Matters) Public Limited Company, a public limited company incorporated under the laws of the Ireland, and its subsidiaries.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Shell Company Report on Form 20-F (including information incorporated by reference herein, the “Report”) contains or may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that involve significant risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Forward-looking statements reflect the Company’s current views with respect to, among other things, its capital resources, performance and results of operations. Likewise, all of the Company’s statements regarding anticipated growth in operations, anticipated market conditions, demographics and results of operations are forward-looking statements. Words such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or variations of such words and similar expressions are intended to identify the forward-looking statements.
Forward-looking statements appear in a number of places in this Report or the Proxy Statement/Prospectus (as defined below) incorporated by reference herein including, without limitation, in the sections entitled “Security Matters’ Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business of Security Matters.” Forward-looking statements in this Report and in any document incorporated by reference in this Report may include, for example, statements about:
| • | the estimated or anticipated future results and benefits of the Company following the Business Combination; |
| • | the Parent’s consolidated financial performance following the Business Combination; |
| • | the ability to obtain or maintain the listing of the Parent Shares on Nasdaq, following the Business Combination; |
| • | changes in Security Matters Limited’s strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects and plans; |
| • | The Company’s ability to develop and launch new products and services; |
| • | The Company’s ability to successfully and efficiently integrate future expansion plans and opportunities; |
| • | The Company’s ability to grow its business in a cost-effective manner; |
| • | The Company’s product development timeline and estimated research and development costs; |
| • | the implementation, market acceptance and success of The Company’s business model; |
| • | developments and projections relating to The Company’s competitors and industry; |
| • | The Company’s approach and goals with respect to technology; |
| • | The Company’s expectations regarding its ability to obtain and maintain intellectual property protection and not infringe on the rights of others; |
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| • | the impact of the COVID-19 or other adverse public health developments pandemic on The Company’s business; |
| • | changes in applicable laws or regulations; and |
| • | the outcome of any known and unknown litigation and regulatory proceedings. |
These forward-looking statements are based on information available as of the date of this Report, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing views as of any subsequent date, and no obligation is undertaken to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. The risk factors and cautionary language referred to or incorporated by reference in this Report provide examples of risks, uncertainties and events that may cause actual results to differ materially from the expectations described in our forward-looking statements, including among other things, the items identified in the section entitled “Risk Factors” of the definitive proxy statement/prospectus (the “Proxy Statement/Prospectus”) filed pursuant to Rule 424(b)(3) with the Securities and Exchange Commission (the “SEC”) by Parent on January 19, 2023 (File No. 333-267301), which are incorporated by reference into this Report. You should, however, review the factors and risks that the Company describes in the reports it will file from time to time with the SEC.
In addition, statements that “Parent believes” and similar statements reflect Parent’s beliefs and opinions on the relevant subject. These statements are based on information available to Parent at the time Parent made such statements. While Parent believes that information provides a reasonable basis for these statements, that information may be limited or incomplete. Parent’s statements should not be read to indicate that it has conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely on these statements.
Although Parent believes the expectations reflected in the forward-looking statements were reasonable at the time made, it cannot guarantee future results, level of activity, performance or achievements. Moreover, neither Parent nor any other person assumes responsibility for the accuracy or completeness of any of these forward-looking statements. You should carefully consider the cautionary statements contained or referred to in this section in connection with the forward-looking statements contained in this Report or any document incorporated by reference herein, and any subsequent written or oral forward-looking statements that may be issued by Parent or persons acting on its behalf.
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISORS
A. Directors and Senior Management
Information regarding the directors and senior management of the Company after the closing of the Business Combination is included in the Proxy Statement/Prospectus, under the section entitled “Management of the Post-Combination Company Following the Business Combination,” and is incorporated herein by reference.
Each of these directors and executive officers named in the Proxy Statement/Prospectus were appointed to such roles on March 7, 2023.
B. Advisors
Afik & Co., 103 Ha’hashmonaim St., P.O.B. 20144, Tel Aviv 6120101 Israel, has acted as counsel to the Company and Security Matters Limited with respect to Israeli law and general counsel matters, and will continue to act as counsel to the Company and Security Matters Limited with respect to Israeli law and general counsel matters following the closing of the Business Combination.
Arthur Cox, Ten Earlsfort Terrace, Dublin 2 D02 T380 Ireland, has acted as counsel to the Company with respect to Irish law and will continue to act as counsel to the Company with respect to Irish law following the closing of the Business Combination.
Ruskin Moscou Faltischek, P.C., 1425 RXR Plaza, East Tower, 15th Floor, Uniondale, New York 11556, has acted as U.S. counsel to the Company and Security Matters Limited with respect to the closing of the Business Combination and will continue to act as U.S. counsel to the Company following the closing of the Business Combination.
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C. Auditors
BDO Audit Pty Ltd. has acted as Security Matters Limited’s independent registered public accounting firm (a) as of December 31, 2021 and 2020 and for each of the years in the two year period ended December 31, 2021 and (b) as of June 30, 2022 and for the six months ended June 30, 2022.
BDO’s principal business address is Amot BDO House, 48 Menachem Begin Rd., Tel Aviv Israel.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
A. [Reserved]
B. Capitalization and Indebtedness
The following table sets forth the capitalization of the Company on an unaudited pro forma consolidated basis as of June 30, 2022, after giving effect to the Business Combination.
| As of June 30, 2022 |
Actual (all amounts in 000 USD) |
Pro Forma (all amounts in 000 USD) |
||||||
| Cash and cash equivalents |
859 | 9,110 | ||||||
| Total liabilities |
3,618 | 26,692 | ||||||
| Share capital |
28,736 | 68,148 | ||||||
| Retained earnings |
(26,278 | ) | (79,809 | ) | ||||
| Other reserves |
3,292 | 1,803 | ||||||
| Total equity |
5,750 | (9,858 | ) | |||||
| Total equity and liabilities |
9,368 | 16,834 | ||||||
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
The risk factors associates with the Company are described in the Proxy Statement/Prospectus in the section entitled, “Risk Factors—Risks Related to Ownership of the Parent Shares Following the Business Combination,” “ —Risks related to Tax,” “ —Risks related to Irish Law,” “ —Risks related to the business and operations of Parent following the Transaction,” “ —Risks Related to Technology, Intellectual Property and Data,” “ —Risks Related to Our Operations in Israel” and “ —Other Risks Associated with the Business of Parent” are incorporated herein by reference.
ITEM 4. INFORMATION OF THE COMPANY
A. History and Development of the Company
The legal name of the Company is SMX (Security Matters) Public Limited Company (f/k/a Empatan Public Limited Company). The Company was formed on July 1, 2022 as a public limited company under the name Empatan Public Limited Company, incorporated in Ireland. The Company’s principal executive office is located at Mespil Business Centre, Mespil House, Sussex Road, Dublin 4, Ireland, D04 T4A6. The Company’s telephone number is +353 1 920 1000.
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The Company was newly incorporated for the purposes of becoming a holding company following the Business Combination. Through the consummation of the Business Combination, the Company did not conduct any material activities other than those incident to its formation and the Business Combination and only had nominal assets consisting of cash and its interest in Merger Sub. See “Explanatory Note” in this Report for additional information regarding the Company and the Business Combination. Certain additional information about the Company is included in the Proxy Statement/Prospectus under the section entitled “Business of Security Matters,” which is incorporated herein by reference. The material terms of the Business Combination are described in the Proxy Statement/Prospectus under the sections entitled “The Business Combination” and “The Business Combination Agreement and Scheme Implementation Deed,” which are incorporated herein by reference.
The Company is subject to certain of the informational filing requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Since the Company is a “foreign private issuer,” it is exempt from the rules and regulations under the Exchange Act prescribing the furnishing and content of proxy statements, and the officers, directors and principal shareholders of the Company are exempt from the reporting and “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act with respect to their purchase and sale of Parent Shares. In addition, the Company is not required to file reports and financial statements with the SEC as frequently or as promptly as U.S. public companies whose securities are registered under the Exchange Act. However, the Company is required to file with the SEC an Annual Report on Form 20-F containing financial statements audited by an independent accounting firm. The SEC maintains a website at http://www.sec.gov that contains reports and other information that the Company files with or furnishes electronically to the SEC.
The website address of the Company is https://smx.tech. The information contained on the website does not form a part of, and is not incorporated by reference into, this Report.
B. Business Overview
Prior to the Business Combination, the Company did not conduct any material activities other than those incidental to its formation and the matters contemplated by the Business Combination Agreement and the Scheme Implementation Deed, such as the making of certain required securities law filings and the establishment of certain subsidiaries. Upon the closing of the Business Combination, the Company became the direct parent of, and conducts its business through Security Matters Limited, a company that provides a solution to solve both authentication and track and trace challenges in order to uphold supply chain integrity and provide quality assurance and brand accountability to producers of goods, and indirect subsidiaries.
Information regarding the business of the Company is included in the Proxy Statement/Prospectus in the section entitled “Business of Security Matters” and “Security Matters’ Management’s Discussion and Analysis of Financial Condition and Results of Operation,” which are incorporated herein by reference.
C. Organizational Structure
The organizational chart of the Company and a description of its subsidiaries following the Business Combination is included on page 36 of the Proxy Statement/Prospectus under the section entitled “Summary of this Proxy Statement/Prospectus—Organizational Structure” and is incorporated herein by reference.
D. Property, Plants and Equipment
Information regarding the facilities of the Company is included in the Proxy Statement/Prospectus in the section entitled “Business of Security Matters—Facilities” and is incorporated herein by reference.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
Following and as a result of the Business Combination, the business of the Company is conducted through Security Matters Limited, its direct wholly-owned subsidiary, as well as the direct, wholly owned subsidiaries of Security Matters Limited.
The discussion and analysis of the financial condition and results of operation of Security Matters Limited is included in the Proxy Statement/Prospectus in the section entitled “Security Matters’ Management’s Discussion and Analysis of Financial Condition and Results of Operations,” which is incorporated herein by reference.
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ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Executive Officers
Information regarding the directors and executive officers of the Company after the closing of the Business Combination is included in the Proxy Statement/Prospectus under the section entitled, “Management of the Post-Combination Company Following the Business Combination” and is incorporated herein by reference.
B. Compensation
Information regarding the compensation of the directors and executive officers of the Company after the closing of the Business Combination is included in the Proxy Statement/Prospectus under the section entitled “Executive Compensation,” which is incorporated herein by reference.
C. Board Practices
Information regarding the board of directors of the Company subsequent to the Business Combination is included in the Proxy Statement/Prospectus under the section entitled “Management of the Post-Combination Company Following the Business Combination” and is incorporated herein by reference.
Following consummation of the Business Combination, the directors have been assigned committee membership as follows:
| Director | Committees | |
| Ophir Sternberg |
— | |
| Haggai Alon |
— | |
| Amir Bader |
Audit Committee; Compensation Committee | |
| Pauline Khoo |
Audit Committee; Compensation Committee | |
| Roger Meltzer |
Compensation Committee | |
| Thomas Hawkins |
Audit Committee | |
| Zeren Browne |
— |
D. Employees
Following and as a result of the Business Combination, the business of the Company is conducted through Security Matters Limited, its direct, wholly owned subsidiary, as well as the direct, wholly owned subsidiaries of Security Matters Limited.
Information regarding the employees of Parent and Security Matters Limited is included in the Proxy Statement/Prospectus under the section entitled “Business of Security Matters – Employees” and is incorporated herein by reference.
E. Share Ownership
Information regarding the ownership of Parent Shares by the Company’s directors and executive officers is set forth in Item 7.A of this Report and the Proxy Statement/Prospectus under the section entitled “Beneficial Ownership of Securities” and is incorporated herein by reference.
Information regarding any arrangements for involving the employees in the capital of the Company, including any arrangement that involves the issue or grant of options or shares or securities of the Company, is included in the Proxy Statement/Prospectus under the sections entitled “Summary of the Proxy Statement/Prospectus – 2022 Incentive Equity Plan” and “The Business Combination Agreement and Scheme Implementation Deed – 2022 Incentive Equity Plan” and are incorporated herein by reference.
On March 7, 2023, an option scheme of arrangement under Part 5.1 of the Corporations Act (“Option Scheme”) was implemented, which resulted in the SMX options held by participants in the Option Scheme being subject to a cashless exercise based on a Black-Scholes valuation, in exchange for SMX Shares. Under the Scheme those shares were cancelled with such participants receiving Parent Shares on the basis of the Scheme consideration.
F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
Not applicable.
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ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
The following table sets forth the information regarding the beneficial ownership of Parent Shares as of the record date:
| • | each person known by Lionheart to be the beneficial owner of more than 5% of Lionheart’s Class A common stock or Class B common stock either on the record date or after the consummation of the Transactions; |
| • | each of Lionheart’s current executive officers and directors and all of Lionheart’s executive offers and directors as a group; and |
| • | each person who will become an executive officer or director of Parent upon consummation of the Transactions and all of Parent’s executive officers and directors as a group. |
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power over that security, and includes shares underlying warrants and options, as applicable, that are currently exercisable or convertible or exercisable or convertible within 60 days. Ordinary Shares that may be acquired within 60 days of March 13, 2023 pursuant to the exercise of warrants or options are deemed to be outstanding for the purpose of computing the percentage ownership of such holder but are not deemed to be outstanding for computing the percentage ownership of any other person or entity shown in the table.
Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to the Ordinary Shares beneficially owned by them.
The percentage of Parent Shares beneficially owned is computed on the basis of 22,501,306 Parent Shares outstanding on the Closing Date, after giving effect to the Business Combination.
| Name and Address of Beneficial Owners | Number of Ordinary Shares |
Percentage of Total Voting Power |
||||||
| Haggai Alon(1) |
544,535 | 2.41 | % | |||||
| Ophir Sternberg(2) |
1,147,250 | 5.10 | % | |||||
| Amir Bader |
31,321 | * | ||||||
| Zeren Browne(3) |
19,326 | * | ||||||
| Pauline Khoo(4) |
34,378 | * | ||||||
| Limor Moshe Lotker(5) |
38,600 | * | ||||||
| Thomas Hawkins |
55,000 | * | ||||||
| Roger Meltzer |
55,000 | * | ||||||
| Greater than 5% Holders |
||||||||
| Lionheart Equities, LLC(2) |
1,147,250 | 5.10 | % | |||||
| Saba Capital Management, L.P.(6) |
1,177,276 | 5.23 | % | |||||
| * | Less than 1% |
| (1) | Represents shares held by Benguy Escrow Company Ltd., a testamentary trust of which Mr. Alon is the beneficiary. Doron Afik is the trustee of Benguy Escrow Company Ltd. The amount of beneficial ownership includes 48,251 Parent Shares issuable as a result of Security Matters Limited options held, that are currently exercisable or exercisable within 60 days. |
| (2) | Ophir Sternberg, Lionheart’s Chairman, President and Chief Executive Officer, is the member of the Sponsor. Mr. Sternberg disclaims beneficial ownership over any securities owned by the Sponsor in which he does not have any pecuniary interest. |
| (3) | Represents shares held by Sooperduper Pty Ltd., which is owned by Ms. Browne and Simon Browne. Ms. Browne is the control person of Sooperduper Pty Ltd. |
| (4) | Represents shares held by in nominee by HSBC Bank Australia Limited. |
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| (5) | Reflects 38,600 Parent Shares issuable as a result of Security Matters Limited options that are currently exercisable or exercisable within 60 days. |
| (6) | Based solely upon information contained in a Schedule 13G/A filed on February 14, 2023, represents 1,177,276 shares of Class A Common Stock. The business address of Saba Capital Management, L.P., is 405 Lexington Avenue, 58th Floor, New York, New York 10174. |
B. Related Party Transactions
Information regarding certain related party transactions is included in the Proxy Statement/Prospectus under the section entitled “Certain Relationships and Related Person Transactions” and is incorporated herein by reference.
C. Interests of Experts and Counsel
Not applicable.
A. Consolidated Statements and Other Financial Information
See Item 18 of this Report for consolidated financial statements and other financial information.
There is no material litigation, arbitration or governmental proceeding currently pending against us or any members of our management team in their capacity as such.
The Company has never declared or paid any cash dividends on its capital stock and does not intend to pay any cash dividends in the foreseeable future. The Company expects to retain future earnings, if any, to fund the development and growth of its business. Any future determination to pay dividends on the Company’s capital stock will be at the discretion of its Board of Directors.
B. Significant Changes
On March 7, 2023, the Company assumed the obligations of Lionheart under a Standby Equity Purchase Agreement (the “SEPA”) entered into on February 23, 2023, by and between Lionheart and YA II PN, Ltd., a Cayman Islands exempt limited partnership managed by Yorkville Advisors Global, LP (the “Investor”)
The Company will have the right to issue and sell to the Investor, from time to time, as provided in the SEPA, and the Investor shall purchase from the Company, up to $25 million in aggregate gross purchase price (the “Commitment Amount”) of the newly issued shares of the Company’s ordinary shares, par value $0.0001 (the “Ordinary Shares”) (each such sale, an “Advance”) by delivering written notice to the Investor (each, an “Advance Notice” and the date on which the Company is deemed to have delivered an Advance Notice, the “Advance Notice Date”). The Ordinary Shares purchased pursuant to an Advance will be purchased at a price equal to (i) 96% of the VWAP of the Ordinary Shares during the period commencing upon receipt by the Company of written confirmation of acceptance of such Advance Notice by the Investor, and which confirmation shall specify such commencement time, and ending on 4:00 p.m. New York City time on the applicable Advance Notice Date or (ii) 97% of the lowest daily VWAP of the Ordinary Shares during the three consecutive trading days commencing on the Advance Notice Date; provided, however, that the Company may establish a minimum acceptable price in each Advance Notice below which the Company will not be obligated to make any sales to the Investor. “VWAP” means, for any trading day, the daily volume weighted average price of the Ordinary Shares for such trading day on the Nasdaq Stock Market during regular trading hours as reported by Bloomberg L.P.
In connection with the SEPA, and subject to the condition set forth therein, the Investor shall advance to the Company in the form of a convertible promissory notes in an aggregate principal amount of $3.5 million (the “Pre-Paid Advance”). The Pre-Paid Advance will be disbursed in two separate installments, the first for $1.5 million at the closing of the Business Combination, which was funded on March 9, 2023, and the second for $2 million upon the effectiveness of the Resale Registration Statement (as defined below). The purchase price for the Pre-Paid Advance will be 92.0% of the Pre-Paid Advance. Such Pre-Paid Advances will be offset upon the issuance of Ordinary Shares to the Investor at a price per share equal to the lower of (a) 100% of the daily VWAP of the Ordinary Shares on The Nasdaq Stock Market as of the trading day immediately prior to the date of the disbursement of the Pre-Paid Advance (the “Fixed Price”), or (b) 93.0% of the lowest daily VWAP of the Ordinary Shares on Nasdaq during the seven trading days immediately prior to each purchase (the “Variable Price” and the lower of the Fixed Price and the Variable Price
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shall be referred to as the “Purchase Price”); however, in no event shall the Purchase Price be less than the lower of $0.50 per share or 20% of the VWAP on the Trading Day immediately prior to the effectiveness of the initial Registration Statement for the underlying Ordinary Shares (the “Floor Price”). Interest shall accrue on the outstanding balance of any Pre-Paid Advance at an annual rate equal to 0%, subject to an increase to 15% upon an event of default as described in the applicable promissory note. The maturity date will be 12-months after the initial closing of the Pre-Paid Advance.
If, any time after a Pre-Paid Advance is issued, the daily VWAP is less than the Floor Price for five Trading Days during a period of 7 consecutive Trading Days (a “Floor Price Trigger”), or (ii) the Company has issued in excess of 95% of the Ordinary Shares available under the Exchange Cap (an “Exchange Cap Trigger”) (the last such day of each such occurrence, a “Trigger Date”) (a “Trigger Event”), the Company shall make monthly payments beginning on the 10th trading day after the Trigger Date and continuing on the same day of each successive calendar month. Each monthly payment shall be in an amount equal to the sum of (i) $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 7% in respect of such Triggered Principal Amount, and (iii) accrued and unpaid interest hereunder as of each payment date. The obligation of the Company 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) 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 (B) the date the Company has obtained stockholder approval to increase the number of Common Stock under the Exchange Cap and/ or the Exchange Cap no longer applies, in the event of an Exchange Cap Trigger, unless a subsequent Trigger Event occurs.
The issuance of the Ordinary Shares under the SEPA will be subject to certain limitations, including that (i) the Investor may not purchase any Ordinary Shares that would result in it owning more than 4.99% of the Company’s Ordinary Shares or (ii) the aggregate number of Ordinary Shares issued pursuant to Pre-Paid Advances (including the aggregation with the issuance of Ordinary Shares under other Advances cannot exceed 19.9% of the Company’s Ordinary Shares as of as of the date of the SEPA (referred to as the “Exchange Cap”). The Exchange Cap shall not be applicable if: (i) the Company’s stockholders have approved the issuance of Common Shares in excess of the Exchange Cap in accordance with the applicable rules of the Principal Market or (ii) to the extent that (and only for so long as) the Average Price for the issuance of Ordinary Shares equals or exceed the lower of (i) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the 6th Trading Day following the date of closing of the Business Combination (the “Effective Date”); or (ii) the average Nasdaq Official Closing Price for the five Trading Days immediately preceding the Effective Date.
In connection with the entry of the SEPA, the Company assumed the obligations of Lionheart under the related Registration Rights Agreement with the Investor (the “Registration Rights Agreement”) pursuant to which the Company agrees to file within 15 business days of the date of the SEPA, a registration statement with the Securities and Exchange Commission (the “SEC”) covering the resale of the Ordinary Shares requested to be included in such registration statement (the “Resale Registration Statement”), and the Company 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 (i) the 30th calendar day following the filing of the Resale Registration Statement or (ii) in the event that there is a Pre-Paid Advance outstanding, the 30th calendar day following the date of the Registration Rights Agreement (or, the fifth calendar day following the date on which the Company is notified by the SEC that the Resale Registration Statement will not be or is no longer subject to further review and comments.
A discussion of other significant changes since June 30, 2022, are provided under Item 4 of this Report and is incorporated herein by reference.
A. Offer and Listing Details
Nasdaq Listing of Parent Shares and Parent Warrants
The Parent Shares are listed on the Nasdaq Global Market under the symbol “SMX” and the Parent Warrants are listed on the Nasdaq Capital Market under the symbol “SMXWW.” Holders of Parent Shares and Parent Warrants should obtain current market quotations for their securities. There can be no assurance that the Parent Shares and/or Parent Warrants will remain listed on Nasdaq. If the Company fails to comply with the Nasdaq listing requirements, the Parent Shares and/or Parent Warrants could be delisted from Nasdaq. A delisting of the Parent Shares will likely affect the liquidity of the Parent Shares and could inhibit or restrict the ability of the Company to raise additional financing.
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Lock-Up Agreements
Information regarding the terms of the Lock-Up Agreements is included in the Proxy Statement/Prospectus in the section entitled, “The Business Combination Agreement and Scheme Implementation Deed – Other Agreements Related to the Business Combination Agreement – Lock-up Agreements,” and is incorporated herein by reference.
Amended and Restated Sponsor Agreement
Information regarding the terms of the Amended and Restated Sponsor Agreement is included in the Proxy Statement/Prospectus in the section entitled, “The Business Combination Agreement and Scheme Implementation Deed – Other Agreements Related to the Business Combination Agreement – Amended and Restated Sponsor Agreement,” and is incorporated herein by reference.
Registration Rights Agreement
Information regarding the terms of the Registration Rights Agreements is included in the Proxy Statement/Prospectus in the section entitled, “The Business Combination Agreement and Scheme Implementation Deed – Other Agreements Related to the Business Combination Agreement – Registration Rights Agreements,” and is incorporated herein by reference.
Voting Agreement
Information regarding the terms of the Voting Agreements is included in the Proxy Statement/Prospectus in the section entitled, “The Business Combination Agreement and Scheme Implementation Deed – Other Agreements Related to the Business Combination Agreement – Voting Agreements,” and is incorporated herein by reference.
2022 Incentive Equity Plan
Information regarding the terms of the 2022 Incentive-Equity Plan is included in the Proxy Statement/Prospectus in the section entitled, “The Business Combination Agreement and Scheme Implementation Deed – Other Agreements Related to the Business Combination Agreement – 2022 Incentive-Equity Plan,” and is incorporated herein by reference.
Parent Warrants
Upon the completion of the Business Combination, there were 6,250,000 Parent Warrants outstanding. The Parent Warrants entitle the holder to purchase one Holdco Share at an exercise price of $11.50 per share. The Parent Warrants will expire five years after the completion of the Business Combination or earlier upon redemption or liquidation in accordance with their terms. Information regarding the Parent Warrants is included in the Proxy Statement/Prospectus under the section entitled “Description of Parent Securities – Warrants” and is incorporated herein by reference.
B. Plan of Distribution
Not applicable.
C. Markets
The Parent Shares are listed on the Nasdaq Global Market under the symbol “SMX” and the Parent Warrants are listed on the Nasdaq Capital Market under the symbol “SMXWW.” If the Company fails to comply with the Nasdaq listing requirements, the Parent Shares and/or Parent Warrants could be delisted from Nasdaq. A delisting of the Parent Shares will likely affect the liquidity of the Parent Shares and could inhibit or restrict the ability of the Company to raise additional financing
D. Selling Shareholders
Not applicable.
E. Dilution
Not applicable.
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F. Expenses of the Issue
Not applicable
ITEM 10. ADDITIONAL INFORMATION
A. Share Capital
The authorized share capital of Parent is US$100,000,000 divided into 800,000,000,000 ordinary shares with a nominal value of US$0.0001 each, 200,000,000,000 preferred shares with a nominal value of US$0.0001 each and €25,000 divided into 25,000 deferred ordinary shares with a nominal value each of €1.00 each.
As of March 7, 2022, subsequent to the closing of the Business Combination, there were 22,501,306 Parent Shares outstanding. Additionally there were (a) 6,250,000 Parent Warrants outstanding, each of which entitle the holder to purchase one Parent Share at an exercise price of $11.50 per share, (b) 2,200,000 Sponsor Warrants, (d) 1,326,747 shares underlying options assumed from an employee stock option plan originally adopted by Security Matters Limited, (d) 597,000 redeemable warrants and 243,000 bonus warrants issued to bridge note holders of Security Matters Limited the obligations of which were assumed by the Company and (e) a convertible bridge promissory note due on or subsequent to March 31, 2024 in the principal amount of $250,000. As of March 7, 2022, Parent held no Parent Shares as treasury shares.
Information regarding the Company’s share capital is included in the Proxy Statement/Prospectus under the section entitled “Description of Parent Securities” and is incorporated herein by reference.
Information regarding events which have changed the amount of issued capital is included in the Proxy Statement/Prospectus under the section entitled “Certain Relationships and Related Person Transaction,” and is incorporated herein by reference.
B. Memorandum and Articles of Association
Information regarding certain material provisions of the articles of association of the Company is included in the Proxy Statement/Prospectus under the sections entitled “Description of Parent Securities” and “Comparison of Corporate Governance and Shareholder Rights” and is incorporated herein by reference.
C. Material Contracts
Material Contracts Relating to the Company’s Operations
Information regarding certain material contracts is included in the Proxy Statement/Prospectus under the sections entitled “Risk Factors—Risks related to the business and operations of Parent following the Transaction,” “Certain Relationships and Related Person Transaction,” and “Business of Security Matters,” and is incorporated herein by reference.
SMX and Parent borrowed an aggregate of US$3,860,000 from private investors between September 2022 and February 2023, which loans are due no earlier than March 31, 2024. All of such loans have an interest rate of 10% per annum. Each such lender further received 20% redeemable 5-year warrant coverage to subscribe for Parent Shares at US$11.50 per share, plus 5% 5-year bonus warrant coverage to subscribe for Parent Shares at US$11.50 per share and a first priority security interest in the shares of Security Matters Limited’s interest in trueGold Consortium Pty Ltd. Additionally, in January 2023, SMX and Parent borrowed US$250,000 from a private investor, which loan is due December 31, 2024. Such loan has an interest rate of 15% per annum, and is convertible at a conversion price of US$10.00 per share.
A discussion of other material contracts, are provided under Item 8(b) of this Report and is incorporated herein by reference.
Material Contracts Relating to the Business Combination
The description of the Business Combination Agreement and Scheme Implementation Deed and related and ancillary agreements are included in the Proxy Statement/Prospectus in the section entitled “The Business Combination Agreement and Scheme Implementation Deed” which is incorporated herein by reference.
D. Exchange Controls
Under the laws of Ireland, there are currently no Irish restrictions on the export or import of capital, including foreign exchange controls or restrictions that affect the remittance of dividends (other than dividend withholding tax where an exemption does not apply) to nonresident holders of our ordinary shares.
E. Taxation
Information pertaining to tax considerations related to the Business Combination is set forth in the Proxy Statement/Prospectus, in the sections entitled “Certain Material Irish Tax Considerations To Non-Irish Holders” and “Certain Material U.S. Federal Income Tax Considerations,” and is incorporated herein by reference.
F. Dividends and Paying Agents
The Company has never declared or paid any cash dividends on its capital stock and currently does not expect to pay any cash dividends on Parent Shares. Any future determination to pay cash dividends or other distributions on Parent Shares will be at the discretion of the board of directors and will be dependent on Parent’s earnings, financial condition, operating results, capital requirements, and contractual, legal regulatory and other restrictions, including restrictions contained in the agreements governing any existing and future outstanding indebtedness Parent or Parent’s subsidiaries incur, on the payment of dividends by Parent or by Parent’s subsidiaries to Parent, and other factors that the Board deems relevant.
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Under Irish law, the Post-Combination Company may only pay dividends and make other distributions (and, generally, make share repurchases and redemptions) only out of “distributable profits” shown on its unconsolidated financial statements prepared in accordance with the Irish Companies Act and filed with the Irish Companies Registration Office. Distributable profits are the accumulated realized profits of the Post-Combination Company that have not previously been utilized in a distribution or capitalization less accumulated realized losses that have not previously been written off in a reduction or reorganization of capital, and include reserves created by way of a reduction of capital. In addition, no dividend may be paid or other distribution, share repurchase or redemption made by the Post-Combination Company unless the net assets of the Post-Combination Company are equal to, or exceed, the aggregate of the Post-Combination Company’s called up share capital plus its undistributable reserves and the dividend or other distribution, share repurchase or redemption does not reduce the Post-Combination Company’s net assets below such aggregate. Undistributable reserves include the un-denominated capital, the capital redemption reserve fund, and the amount by which the Post-Combination Company accumulated unrealized profits that have not previously been utilized by any capitalization exceed the Post-Combination Company’s accumulated unrealized losses that have not previously been written off in a reduction or reorganization of capital.
The Post-Combination Company, as a new parent company with no operational history, will have no distributable profits of its own. Accordingly, in order to pay dividends or make other distributions, share repurchases or redemptions, the Post-Combination Company will need to generate distributable profits from its business activities or otherwise create distributable profits by alternative means, including a reduction of capital.
G. Statement by Experts
The Consolidated financial statements of Security Matters Limited as of December 31, 2021 and 2020, and for the years ended December 31, 2021 and 2020, appearing in this Report and in the Proxy Statement/Prospectus have been so included in reliance on the report of BDO Ziv Haft, independent registered public accounting firm, as set forth in their report thereon, appearing elsewhere in this Report and the Proxy Statement/Prospectus, and are included in reliance on such report given on the authority of said firm as experts in auditing and accounting.
H. Documents on Display
Documents concerning the Company referred to in this Report may be inspected at the principal executive offices of the Company at Mespil Business Centre, Mespil House, Sussex Road, Dublin 4, Ireland, D04 T4A6.
We are subject to certain of the informational filing requirements of the Exchange Act. Since we are a “foreign private issuer,” our officers, directors and principal shareholders are exempt from the reporting and “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act, with respect to their purchase and sale of our equity securities. In addition, we are not required to file reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we are required to file with the SEC an Annual Report on Form 20-F containing financial statements audited by an independent registered public accounting firm. We will also furnish to the SEC, on Form 6-K, unaudited financial information with respect to our first six-month period of our fiscal year. The SEC also maintains a website at http://www.sec.gov that contains reports and other information that we file with or furnish electronically with the SEC.
I. Subsidiary Information
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Information regarding the quantitative and qualitative disclosure about market risk is included in the Proxy Statement/Prospectus under the section entitled “Security Matters’ Management’s Discussion and Analysis of Financial Condition and Results of Operations – Quantitative and Qualitative Disclosures about Market Risk” in the and is incorporated herein by reference.
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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Information pertaining to the Parent Warrants is described under the heading “Parent Warrants” in Item 9.A above and is included in the Proxy Statement/Prospectus under the section entitled “Description of Parent Securities – Warrants” and is incorporated herein by reference.
Not applicable.
See Item 18.
The condensed unaudited financial statements of Lionheart as of September 30, 2022 and December 31, 2021 are incorporated herein by reference to pages F-2 to F-23 in the Proxy Statement/Prospectus.
The unaudited consolidated financial statements of Security Matters Limited as of December 31, 2021 and June 30, 2022 are incorporated herein by reference to pages F-43 to F-54 in the Proxy Statement/Prospectus.
The audited consolidated financial statements of Security Matters Limited as of December 31, 2021 and 2020 are incorporated herein by reference to pages F-55 to F-89 in the Proxy Statement/Prospectus.
The unaudited pro forma condensed combined financial statements of the Company and Lionheart are attached as Exhibit 15.1 to this Report.
EXHIBIT INDEX
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The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Report on its behalf.
| SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY | ||||||
| March 13, 2023 | By: | /s/ Haggai Alon | ||||
| Name: | Haggai Alon | |||||
| Title: | CFO | |||||
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Exhibit 4.27
Execution Version
RECIPROCAL STANDBY EQUITY PURCHASE AGREEMENT
THIS RECIPROCAL STANDBY EQUITY PURCHASE AGREEMENT (this “Agreement”) dated as of February 23, 2023 is made by and between YA II PN, LTD., a Cayman Islands exempt limited partnership (the “Investor”), and Lionheart III Corp, a company incorporated under the laws of the State of Delaware (the “Company”). For purposes of this Agreement, references to the “Company” shall also include, after the closing of the Business Combination (as defined below), Empatan Public Limited Company, a public limited company organized under the laws of Ireland (the “Parent”), pursuant to the transactions contemplated by that certain (i) Business Combination Agreement (as it may be amended or supplemented from time to time, the “BCA”), by and among the Company, the Parent, Security Matters Limited, a publicly traded company on the Australian Securities Exchange (“SMX”), and Aryeh Merger Sub, Inc., a company incorporated under the laws of the State of Delaware (“Merger Sub”) and a wholly owned subsidiary of the Parent, pursuant to which, upon the terms and subject to the conditions contained therein, Merger Sub shall be merged with and into the Company, with the Company continuing as a wholly owned subsidiary of the Parent; and (ii) that certain scheme implementation deed (“SID”) by and among the Company, SMX and Parent, resulting in SMX becoming a wholly owned subsidiary of the Parent. The transactions contemplated by the BCA and the SID (collectively, the “Business Combination”). In connection with the Business Combination, the Parent will change its corporate name to “SMX (Security Matters) PLC.” The business combination and the other transactions described in the BCA and the SID are collectively referred to herein as the “Business Combination.” The Investor and the Company may be referred to herein individually as a “Party” and collectively as the “Parties.”
WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Company, upon the closing of the Business Combination shall have the right to issue and sell to the Investor, from time to time as provided herein, and the Investor shall purchase from the Company, up to $25 million of the Company’s ordinary shares, par value $0.0001 per share (the “Common Shares”); and
WHEREAS, the offer and sale of the Common Shares issuable hereunder will be made in reliance upon Section 4(a)(2) under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”), or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to any or all of the transactions to be made hereunder; and
WHEREAS, the parties are concurrently entering into a Registration Rights Agreement in the form attached as Exhibit A hereto (the “Registration Rights Agreement”), pursuant to which the Company shall register the resale of the Registrable Securities (as defined in the Registration Rights Agreement), upon the terms and subject to the conditions set forth therein.
NOW, THEREFORE, the parties hereto agree as follows:
Article I. Certain Definitions
Capitalized terms used in this Agreement shall have the meanings ascribed to such terms in Annex I hereto, and hereby made a part hereof, or as otherwise set forth in this Agreement.
Article II. Advances
Section 2.01 Advances; Mechanics. Upon the terms and subject to the conditions of this Agreement, during the Commitment Period, the Company, at its sole discretion, shall have the right, but not the obligation (except pursuant to an Investor Notice), to issue and sell to the Investor, and the Investor shall purchase from the Company, Advance Shares by the delivery to the Investor of Advance Notices on the following terms:
| (a) | Advance Notice. At any time during the Commitment Period the Company may require the Investor to purchase Shares by delivering an Advance Notice to the Investor, subject to the satisfaction or waiver by the Investor of the conditions set forth in Annex II, and in accordance with the following provisions: |
| (i) | The Company shall, in its sole discretion, select the number of Advance Shares, not to exceed the Maximum Advance Amount, it desires to issue and sell to the Investor in each Advance Notice and the time it desires to deliver each Advance Notice. |
| (ii) | Except pursuant to an Investor Notice, there shall be no mandatory minimum Advances and there shall be no non-usages fee for not utilizing the Commitment Amount or any part thereof. |
| (iii) | Except pursuant to an Investor Notice, the Company shall not deliver any Advance Notices while any balance remaining outstanding under a Promissory Note, without the consent of the Investor. |
| (b) | Date of Delivery of Advance Notice. Advance Notices shall be delivered in accordance with the instructions set forth on the bottom of Exhibit A attached hereto. An Advance Notice selecting an Option 1 Pricing Period shall only be delivered on a Trading Day and shall be deemed delivered on the day such notice is received by e-mail. An Advance Notice selecting an Option 2 Pricing Period shall be deemed delivered on (i) the day it is received by the Investor if such notice is received by e-mail at or before 8:30 a.m. New York City time (or at such later time if waived by the Investor in its sole discretion), or (ii) the immediately succeeding day if it is received by e-mail after 8:30 a.m. New York City time. An Advance Notice deemed delivered pursuant to an Investor Notice shall be deemed delivered on the date upon which the Investor Notice is received by the Company. Upon receipt of an Advance Notice, the Investor shall promptly (and, with respect to an Advance Notice selecting an Option 1 Pricing Period, in no event more than one-half hour after receipt) provide written confirmation (which may be by e-mail) of receipt of such Advance Notice, and which confirmation, in the case of an Advance Notice selecting an |
Option 1 Pricing Period, shall specify the commencement time of the Option 1 Pricing Period.
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| (c) | Advance Limitations. Regardless of the number of Advance Shares requested by the Company in the Advance Notice, the final number of Shares to be issued and sold pursuant to an Advance Notice shall be reduced (if at all) in accordance with each of the following limitations: |
| (i) | Ownership Limitation; Commitment Amount. At the request of the Company, the Investor will inform the Company in writing of the number of shares the Investor currently beneficially owns. At the request of the Investor, the Company shall promptly confirm orally or in writing to the Investor the number of Common Shares then outstanding. Notwithstanding anything to the contrary contained in this Agreement, the Investor shall not be obligated to purchase or acquire, and shall not purchase or acquire, any Common Shares under this Agreement which, when aggregated with all other Common Shares beneficially owned by the Investor and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d- 3 promulgated thereunder), would result in the beneficial ownership by the Investor and its affiliates (on an aggregated basis) to exceed 4.99% of the then outstanding voting power or number of Common Shares (the “Ownership Limitation”). In connection with each Advance Notice, any portion of the Advance that would (i) cause the Investor to exceed the Ownership Limitation or (ii) cause the aggregate number of Shares issued and sold to the Investor hereunder to exceed the Commitment Amount shall automatically be withdrawn with no further action required by the Company, and such Advance Notice shall be deemed automatically modified to reduce the Advance by an amount equal to such withdrawn portion; provided that in the event of any such automatic withdrawal and automatic modification, the Investor will promptly notify the Company of such event. |
| (ii) | Registration Limitation. In no event shall an Advance exceed the amount registered in respect of the transactions contemplated hereby under the Registration Statement then in effect (the “Registration Limitation”). In connection with each Advance Notice, any portion of an Advance that would exceed the Registration Limitation shall automatically be withdrawn with no further action required by the Company and such Advance Notice shall be deemed automatically modified to reduce the aggregate amount of the requested Advance by an amount equal to such withdrawn portion; provided that in the event of any such automatic withdrawal and automatic modification, the Investor will promptly notify the Company of such event. |
| (iii) | Compliance with Rules of Principal Market. Notwithstanding anything to the contrary herein, the Company shall not effect any sales under this Agreement and the Investor shall not have the obligation to purchase Common Shares under this Agreement to the extent (but only to the extent) that after giving effect to such purchase and sale the aggregate number of Common Shares |
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| issued under this Agreement would exceed [4,459,601]1 (representing 19.9% of the aggregate amount of Common Shares that are expected to be issued and outstanding as of the date of the Closing of the Business Combination)2, calculated in accordance with the rules of the Principal Market, which number shall be reduced, on a share-for-share basis, by the number of Common Shares issued or issuable pursuant to any transaction or series of transactions that may be aggregated with the transactions contemplated by this Agreement under the applicable rules of the Principal Market (such maximum number of shares, the “Exchange Cap”) unless the Company’s stockholders have approved the issuance of Common Shares pursuant to this Agreement in excess of the Exchange Cap in accordance with the applicable rules of the Principal Market. Notwithstanding the foregoing, the Exchange Cap shall not be applicable for any purposes under this Agreement and the transactions contemplated hereby, solely to the extent that (and only for so long as) the Average Price shall equal or exceed [$]3 per share (which represents the lower of (i) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the Effective Date; or (ii) the average Nasdaq Official Closing Price for the five Trading Days immediately preceding the Effective Date). In connection with each Advance Notice, any portion of an Advance that would exceed the Exchange Cap shall automatically be withdrawn with no further action required by the Company and such Advance Notice shall be deemed automatically modified to reduce the aggregate amount of the requested Advance by an amount equal to such withdrawn portion in respect of each Advance Notice. The Exchange Cap and the per share prices provided in this subsection shall be appropriately adjusted for any stock dividend, stock split, reverse stock split or any similar transaction. |
| (d) | Volume Threshold. In connection with an Advance Notice (other than in connection with an Investor Notice) selecting an Option 1 Pricing Period, if the total number of Common Shares traded on the Principal Market during the applicable Pricing Period is less than the Volume Threshold, then the number of Advance Shares issued and sold pursuant to such Advance Notice shall be reduced to the greater of (a) 30% of the trading volume of the Company’s Common Shares on the Principal Market during the Pricing Period as reported by Bloomberg L.P., or (b) the number of Common Shares sold by the Investor during such Pricing Period, but not to exceed the amount requested in the Advance Notice. |
3 Calculate prior to Execution
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| (e) | Minimum Acceptable Price. |
| (i) | With respect to each Advance Notice (other than in connection with an Investor Notice) selecting an Option 2 Pricing Period, the Company may notify the Investor of the MAP with respect to such Advance by indicating a MAP on such Advance Notice. If no MAP is specified in an Advance Notice, then no MAP shall be in effect in connection with such Advance. Each Trading Day during an Option 2 Pricing Period for which (A) with respect to each Advance Notice with a MAP, the VWAP of the Common Shares is below the MAP in effect with respect to such Advance Notice, or (B) there is no VWAP (each such day, an “Excluded Day”), shall result in an automatic reduction to the number of Advance Shares set forth in such Advance Notice by one-third (the resulting amount of each Advance being the “Adjusted Advance Amount”), and each Excluded Day shall be excluded from the Option 2 Pricing Period for purposes of determining the Market Price. |
| (ii) | The total Advance Shares in respect of each Advance (after reductions have been made to arrive at the Adjusted Advance Amount, if any) shall be automatically increased by such number of Common Shares (the “Additional Shares”) equal to the number of Common Shares sold by the Investor on such Excluded Day, if any, and the price paid per share for each Additional Share shall be equal to the MAP in effect with respect to such Advance Notice, multiplied by 97%, provided that this increase shall not cause the total Advance Shares to exceed the amount set forth in the original Advance Notice or any limitations set forth in Section 2.01(c). |
| (f) | Unconditional Contract. Notwithstanding any other provision in this Agreement, the Company and the Investor acknowledge and agree that upon the Investor’s receipt of a valid Advance Notice from the Company the parties shall be deemed to have entered into an unconditional contract binding on both parties for the purchase and sale of Advance Shares pursuant to such Advance Notice in accordance with the terms of this Agreement and (i) subject to Applicable Laws and (ii) subject to Section 7.19, the Investor may sell Common Shares after receipt of an Advance Notice, including during a Pricing Period. |
Section 2.02 Closings. The closing of each Advance and each sale and purchase of Advance Shares (whether pursuant to an Advance Notice delivered by the Company or in connection with an Advance Notice deemed delivered by the Company in connection with an Investor Notice) (each, a “Closing”) shall take place as soon as practicable on or after each Advance Date in accordance with the procedures set forth below. The Company acknowledge that, other than in connection with an Investor Notice, the Purchase Price is not known at the time an Advance Notice is delivered (at which time the Investor is irrevocably bound) but shall be determined on each Closing based on the daily prices of the Common Shares that are the inputs to the determination of the Purchase Price. In connection with each Closing, the Company and the Investor shall fulfill each of its obligations as set forth below:
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| (a) | On or prior to each Advance Date, the Investor shall deliver to the Company a Settlement Document, setting forth the number of Shares to be purchased by the Investor (taking into account any adjustments pursuant to Section 2.01), the Market Price, the Purchase Price, the aggregate proceeds to be paid by the Investor to the Company, and a report by Bloomberg, L.P. indicating the VWAP for each of the Trading Days during the Pricing Period (or, if not reported on Bloomberg, L.P., another reporting service reasonably agreed to by the parties), in each case in accordance with the terms and conditions of this Agreement. |
| (b) | Promptly after receipt of the Settlement Document with respect to each Advance (and, in any event, not later than one Trading Day after such receipt), the Company will, or will cause its transfer agent to, electronically transfer such number of Advance Shares to be purchased by the Investor (as set forth in the Settlement Document) by crediting the Investor’s account or its designee’s account at the Depository Trust Company through its Deposit Withdrawal at Custodian System or by such other means of delivery as may be mutually agreed upon by the parties hereto, and transmit notification to the Investor that such share transfer has been requested. Promptly upon receipt of such notification, the Investor shall pay to the Company the aggregate purchase price of the Shares (as set forth in the Settlement Document) either (i) in cash in immediately available funds to an account designated by the Company in writing and transmit notification to the Company that such funds transfer has been requested, or (ii) in the case of an Investor Notice, as an offset of amounts owed under a Promissory Note as described in Section 3.02(c). No fractional shares shall be issued, and any fractional amounts shall be rounded to the next higher whole number of shares. To facilitate the transfer of the Common Shares by the Investor, the Common Shares will not bear any restrictive legends so long as there is an effective Registration Statement covering the resale of such Common Shares (it being understood and agreed by the Investor that notwithstanding the lack of restrictive legends, the Investor may only sell such Common Shares pursuant to the Plan of Distribution set forth in the Prospectus included in the Registration Statement and otherwise in compliance with the requirements of the Securities Act (including any applicable prospectus delivery requirements) or pursuant to an available exemption). |
| (c) | On or prior to the Advance Date, each of the Company and the Investor shall deliver to the other all documents, instruments and writings expressly required to be delivered by either of them pursuant to this Agreement in order to implement and effect the transactions contemplated herein. |
| (d) | Notwithstanding anything to the contrary in this Agreement, if on any day during the Pricing Period (i) the Company notifies Investor that a Material Outside Event has occurred, or (ii) the Company notifies the Investor of a Black Out Period, the parties agree that the pending Advance shall end and the final number of Advance Shares to be purchased by the Investor at the Closing for such Advance shall be equal to the number of Common Shares sold by the Investor during the applicable Pricing Period prior to the notification from the Company of a Material Outside Event or Black Out Period. |
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Section 2.03 Hardship.
| (a) | In the event the Investor sells Common Shares after receipt, or deemed receipt of an Advance Notice and the Company fails to perform its obligations as mandated in in this agreement, the Company agrees that in addition to and in no way limiting the rights and obligations set forth in Article VI hereto and in addition to any other remedy to which the Investor is entitled at law or in equity, including, without limitation, specific performance, it will hold the Investor harmless against any loss, claim, damage, or expense (including reasonable and documented legal fees and expenses), as incurred, arising out of or in connection with such default by the Company and acknowledges that irreparable damage may occur in the event of any such default. It is accordingly agreed that the Investor shall be entitled to an injunction or injunctions to prevent such breaches of this Agreement and to specifically enforce (subject to Applicable Laws and the rules of the Principal Market), without the posting of a bond or other security, the terms and provisions of this Agreement. |
Article III. Pre-Paid Advances
Section 3.01 Pre-Paid Advances. Subject to the satisfaction of the conditions set forth in Annex III attached hereto, the Investor shall advance to the Company up to $3,500,000 of the Commitment Amount hereunder, in tranches (each tranche, a “Pre-Paid Advance”), which shall be evidenced by convertible promissory notes in the form attached hereto as Exhibit D (each, a “Promissory Note”). The first Pre-Paid Advance shall be in an amount of $1,500,000 and advanced upon the signing of this Agreement (the “First Pre-Advance Closing”), and the second Pre-Paid Advance shall be in an amount of $2,000,000 and advanced on the second Trading Day after the effectiveness of the initial Registration Statement (the “Second Pre-Advance Closing”) (individually referred to as a “Pre-Advance Closing” and collectively referred to as the “PreAdvance Closings”). Each Pre-Advance Closing shall occur remotely by conference call and electronic delivery of documentation. The First Pre-Advance Closing shall take place at 10:00 a.m., New York time, on the date hereof, provided that the conditions set forth on Annex III have been satisfied (or such other date as is mutually agreed to by the Company and the Investor). The Second Pre-Advance Closing shall take place at 10:00 a.m., New York time, on the second Trading Day after the effectiveness of the initial Registration Statement, provided that the conditions set forth on Annex III have been satisfied (or such other date as is mutually agreed to by the Company and the Investor). At each Pre-Advance Closing the Investor shall advance to the Company the amount of such Pre-Paid Advance, less a discount in the amount equal to 8% of the amount of the Pre-Paid Advance, in immediately available funds to an account designated by the Company in writing, and the Company shall deliver a Promissory Note with a principal amount equal to the full amount of the Pre-Paid Advance, duly executed on behalf of the Company.
Section 3.02 Investor Notices; Mechanics. Upon the terms and subject to the conditions of this Agreement, at any time during the Commitment Period, provided that there is a balance remaining outstanding under a Promissory Note, the Investor may, by providing written notice to the Company in the form set forth herein as Exhibit E attached hereto (a “Investor Notice”) cause an Advance Notice to be deemed delivered to the Investor and the issuance and sale of Shares to the Investor pursuant to an Advance, in accordance with the following provisions:
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| (a) | Each Investor Notice shall be delivered to the Company by email and shall be deemed delivered on the day it is received by the Company. |
| (b) | The Investor shall, in each Investor Notice, select the amount of the Advance, in its sole discretion, up to the Maximum Advance Amount, and the timing of delivery; provided that the amount of the Advance shall not exceed the balance owed under all Promissory Notes outstanding on the date of delivery of the Investor Notice, or result in the Investor exceeding the Ownership Limitation, the Registration Limitation, and the Exchange Cap. Any Advance in respect of an Investor Notice shall automatically be adjusted pursuant to the provisions of Section 2.01(c) of this Agreement in order to comply with such limitations. |
| (c) | The Purchase Price of the Shares in respect of any Advance Notice delivered pursuant to an Investor Notice shall be equal to the Conversion Price (as defined in the Promissory Note) in effect on the date of delivery of the Investor Notice. |
| (d) | Each Investor Notice shall set forth the amount of the Advance requested, the Purchase Price (which shall be equal to the Conversions Price) along with a report by Bloomberg, L.P. indicating the relevant VWAP used in calculating the Conversion Price, the number of Shares to be issued by the Company and purchased by the Investor, the aggregate amount of accrued and unpaid interest of the Promissory Note (if any) that shall be offset by the issuance of Shares, the aggregate amount of principal of the Promissory Note that shall be offset by the issuance of Shares, and the total amount of the Promissory Note that shall be outstanding following the closing of the Advance, and each Investor Notice shall serve as the Settlement Document in respect of such Advance. |
| (e) | Upon the delivery of an Investor Notice, a corresponding Advance Notice shall simultaneously and automatically be deemed to have been delivered by the Company to the Investor requesting the amount of the Advance set forth in the Investor Notice, and any conditions precedent to such Advance Notice under the terms of this Agreement that have not been satisfied shall be deemed to have been waived by the Investor. |
| (f) | Limitations on Investor Notes. The Investor agrees that, except as set forth below, it shall not submit Investor Notices requesting Advances of more than $500,000 in any consecutive 30-day period. The limitations agreed by the Investor in this section shall not apply (i) at any time upon the occurrence and during the continuance of an Event of Default (as defined in the Promissory Note) and (ii) with respect to any Investor Notice requesting an Advance where the Purchase Price is greater than or equal to a price per share equal to the Fixed Price (as defined in the Promissory Note). The foregoing limitations in this subsection may be waived with the prior written consent of the Company, in its sole discretion. |
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| (g) | Closings. The closing of each Advance Notice deemed to be delivered pursuant to an Investor Notice and the issuance of Shares related to the corresponding Advance Notice shall take place as soon as practicable on or after the date of each Investor Notice in accordance with the procedures set forth in Section 2.02 of this Agreement. |
Article IV. Representations and Warranties of the Investor
The Investor represents and warrants to the Company, as of the date hereof, as of each Advance Notice Date and as of the date of each Pre-Advance Closing that:
Section 4.01 Organization and Authorization. The Investor is duly organized, validly existing and in good standing under the laws of the Cayman Islands and has the requisite corporate power and authority to enter into and perform its obligations under the Transaction documents to which it is a party, including all transactions contemplated hereby and thereby. The decision to invest and the execution and delivery of the Transaction Documents to which it is a party by the Investor, the performance by the Investor of its obligations hereunder and thereunder and the consummation by the Investor of the transactions contemplated hereby and thereby have been duly authorized and require no other proceedings on the part of the Investor. The undersigned has the right, power and authority to execute and deliver the Transaction Documents to which it is a party and all other instruments on behalf of the Investor or its shareholders. This Agreement and the other Transaction Documents to which the Investor is a party have been duly executed and delivered by the Investor and, assuming the execution and delivery hereof and acceptance thereof by the Company, will constitute the legal, valid and binding obligations of the Investor, enforceable against the Investor in accordance with its terms.
Section 4.02 Evaluation of Risks. The Investor has such knowledge and experience in financial, tax and business matters as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in the Common Shares of the Company and of protecting its interests in connection with the transactions contemplated hereby. The Investor acknowledges and agrees that its investment in the Company involves a high degree of risk, and that the Investor may lose all or a part of its investment.
Section 4.03 No Legal, Investment or Tax Advice from the Company. The Investor acknowledges that it had the opportunity to review the Transaction Documents and the transactions contemplated by the Transaction Documents with its own legal counsel and investment and tax advisors. The Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of the Company’s representatives or agents for legal, tax, investment or other advice with respect to the Investor’s acquisition of Common Shares hereunder, the transactions contemplated by this Agreement or the laws of any jurisdiction, and the Investor acknowledges that the Investor may lose all or a part of its investment.
Section 4.04 Investment Purpose. The Investor is acquiring the Common Shares and any Promissory Note for its own account, for investment purposes and not with a view towards, or for resale in connection with, the public sale or distribution thereof, except pursuant to sales registered under or exempt from the registration requirements of the Securities Act; provided, however, that by making the representations herein, the Investor does not agree, or make any representation or
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warranty, to hold any of the Shares for any minimum or other specific term and reserves the right to dispose of the Shares at any time in accordance with, or pursuant to, a Registration Statement filed pursuant to this Agreement or an applicable exemption under the Securities Act. The Investor does not presently have any agreement or understanding, directly or indirectly, with any Person to sell or distribute any of the Shares. The Investor acknowledges that it will be disclosed as an “underwriter” and a “selling stockholder” in each Registration Statement and in any Prospectus contained therein to the extent required by applicable law and to the extent the Prospectus is related to the resale of Registrable Securities.
Section 4.05 Accredited Investor. The Investor is an “Accredited Investor” as that term is defined in Rule 501(a)(3) of Regulation D.
Section 4.06 Information. The Investor and its advisors (and its counsel), if any, have been furnished with all materials relating to the business, finances and operations of the Company and information the Investor deemed material to making an informed investment decision. The Investor and its advisors (and its counsel), if any, have been afforded the opportunity to ask questions of the Company and its management and have received answers to such questions. Neither such inquiries nor any other due diligence investigations conducted by such Investor or its advisors (and its counsel), if any, or its representatives shall modify, amend or affect the Investor’s right to rely on the Company’s representations and warranties contained in this Agreement. The Investor acknowledges and agrees that the Company has not made to the Investor, and the Investor acknowledges and agrees it has not relied upon, any representations and warranties of the Company, its employees or any third party other than the representations and warranties of the Company contained in this Agreement. The Investor understands that its investment involves a high degree of risk. The Investor has sought such accounting, legal and tax advice, as it has considered necessary to make an informed investment decision with respect to the transactions contemplated hereby.
Section 4.07 Not an Affiliate. The Investor is not an officer, director or a person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with the Company or any “Affiliate” of the Company (as that term is defined in Rule 405 promulgated under the Securities Act).
Section 4.08 No Prior Short Sales. At no time prior to the date of this Agreement has the Investor, its sole member, any of their respective officers, or any entity managed or controlled by the Investor or its sole member, engaged in or effected, in any manner whatsoever, directly or indirectly, for its own principal account, any (i) “short sale” (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of the Common Shares or (ii) hedging transaction, which establishes a net short position with respect to the Common Shares that remains in effect as of the date of this Agreement.
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Section 4.09 General Solicitation. Neither the Investor, nor any of its affiliates, nor any person acting on its or their behalf, has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with any offer or sale of the Common Shares by the Investor.
Article V. Representations and Warranties of the Company
Except as set forth in the disclosure schedule delivered by the Company to the Investor concurrently with this Agreement (which is hereby incorporated by reference in, and constitutes an integral part of, this Agreement) (the “Disclosure Schedule”), or where specifically set forth below with respect to certain specified representations and warranties, the SEC Documents, the Company hereby makes the following representations, warranties and covenants to the Investor:
Section 5.01 Organization and Qualification. The Company and each of its Subsidiaries are entities duly formed, validly existing and in good standing under the laws of the jurisdiction in which they are formed, and have the requisite power and authority to own their properties and to carry on their business as now being conducted. The Company and each of its Subsidiaries is duly qualified to do business and is in good standing or the equivalent in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary, except to the extent that the failure to be so qualified or be in good standing would not have a Material Adverse Effect.
Section 5.02 Authorization, Enforcement, Compliance with Other Instruments. The Company has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and the other Transaction Documents and to issue the Shares in accordance with the terms hereof and thereof. The execution and delivery by the Company of this Agreement and the other Transaction Documents, and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Common Shares) have been or (with respect to consummation) will be duly authorized by the Company’s board of directors and no further consent or authorization will be required by the Company, its board of directors or its shareholders. This Agreement and the other Transaction Documents to which the Company is a party have been (or, when executed and delivered, will be) duly executed and delivered by the Company and, assuming the execution and delivery thereof and acceptance by the Investor, constitute (or, when duly executed and delivered, will be) the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or other laws relating to, or affecting generally, the enforcement of applicable creditors’ rights and remedies and except as rights to indemnification and to contribution may be limited by federal or state securities law.
Section 5.03 Authorization of the Shares. The Shares to be issued under this Agreement have been, or with respect to Shares to be purchased by the Investor pursuant to an Advance Notice, will be, when issued and delivered pursuant to the terms approved by the board of directors of the Company or a duly authorized committee thereof, or a duly authorized executive committee, against payment therefor as provided herein, duly and validly authorized and issued and fully paid and nonassessable, free and clear of any pledge, lien, encumbrance, security interest or other claim, including any statutory or contractual preemptive rights, resale rights, rights of first refusal or other
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similar rights, and will be registered pursuant to Section 12 of the Exchange Act. The Shares, when issued, will conform to the description thereof set forth in or incorporated into the Prospectus. As of the date of each Pre-Advance Closing, the Company shall have reserved from its duly authorized capital stock not less than the maximum number of shares of Common Shares issuable upon conversion of all Promissory Notes (assuming for purposes hereof that (x) such Promissory Notes are convertible at a Conversion Price equal to the Floor Price (as defined in each Promissory Note) as of the date of determination, and (y) any such conversion shall not take into account any limitations on the conversion of the Promissory Notes set forth therein.
Section 5.04 No Conflict. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance of the Common Shares) will not (i) result in a violation of the articles of incorporation or other organizational documents of the Company or its Subsidiaries (with respect to consummation, as the same may be amended prior to the date on which any of the transactions contemplated hereby are consummated), (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or its Subsidiaries is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or its Subsidiaries or by which any property or asset of the Company or its Subsidiaries is bound or affected except, in the case of clause (ii) or (iii) above, to the extent such violations that would not reasonably be expected to have a Material Adverse Effect.
Section 5.05 The Company understands and acknowledges that the number of Common Shares issuable upon conversion of the Promissory Notes will increase in certain circumstances. The Company further acknowledges its obligation to issue the Common Shares upon conversion of the Promissory Notes in accordance with the terms thereof or upon delivery of an Advance Notice (including upon receipt of an Investor Notice) is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other stockholders of the
Company.
Section 5.06 SEC Documents; Financial Statements. Since November 3, 2021 the Company has timely filed (giving effect to permissible extensions in accordance with Rule 12b-25 under the Exchange Act) all SEC Documents. The Company has delivered or made available to the Investor through the SEC’s website at http://www.sec.gov, true and complete copies of the SEC Documents, as applicable. Except as disclosed in amendments or subsequent filings to the SEC Documents, as of its filing date (or, if amended or superseded by a filing prior to the date hereof, on the date of such amended or superseded filing), each SEC Documents complied in all material respects with the requirements of the Exchange Act or the Securities Act, as applicable, and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and did not contain any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
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Section 5.07 Financial Statements. The consolidated financial statements of the Company included or incorporated by reference in the SEC Documents, together with the related notes and schedules, present fairly, in all material respects, the consolidated financial position of the Company and the Subsidiaries as of the dates indicated and the consolidated results of operations, cash flows and changes in stockholders’ equity of the Company for the periods specified and have been prepared in compliance with the requirements of the Securities Act and Exchange Act and in conformity with generally accepted accounting principles in the United States (“GAAP”) applied on a consistent basis (except for (i) such adjustments to accounting standards and practices as are noted therein, (ii) in the case of unaudited interim financial statements, to the extent such financial statements may not include footnotes required by GAAP or may be condensed or summary statements and (iii) such adjustments which are not material, either individually or in the aggregate) during the periods involved; the other financial and statistical data with respect to the Company and the Subsidiaries contained or incorporated by reference in the SEC Documents are accurately and fairly presented and prepared on a basis consistent with the financial statements and books and records of the Company; there are no financial statements (historical or pro forma) that are required to be included or incorporated by reference in the SEC Documents that are not included or incorporated by reference as required; the Company and the Subsidiaries do not have any material liabilities or obligations, direct or contingent (including any off-balance sheet obligations), not described in the SEC Documents (excluding the exhibits thereto); and all disclosures contained or incorporated by reference in the SEC Documents regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission) comply in all material respects with Regulation G of the Exchange Act and Item 10 of Regulation S-K under the Securities Act, to the extent applicable. The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the SEC Documents fairly presents the information called for in all material respects and has been prepared in accordance with the SEC’s rules and guidelines applicable thereto.
Section 5.08 Registration Statement and Prospectus. The Company and the transactions contemplated by this Agreement meet the requirements for and comply with the conditions for the use of Form F-1 under the Securities Act. Each Registration Statement and the offer and sale of Shares as contemplated hereby, if and when filed, will meet the requirements of Rule 415 under the Securities Act and comply in all material respects with said rule. Any statutes, regulations, contracts or other documents that are required to be described in a Registration Statement or a Prospectus, or to be filed as exhibits to a Registration Statement have been so described or filed. Copies of each Registration Statement, any Prospectus, and any such amendments or supplements thereto and all documents incorporated by reference therein that were filed with the Commission on or prior to the date of this Agreement have been delivered, or are available through EDGAR, to the Investor and its counsel. The Company has not distributed and, prior to the later to occur of each Advance Notice Date and completion of the distribution of the Shares, will not distribute any offering material in connection with the offering or sale of the Shares other than a Registration Statement and the Prospectus to which the Investor has consented (such consent not be unreasonably delayed, withheld or conditioned).
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Section 5.09 No Misstatement or Omission. Each Registration Statement, when it became or becomes effective, and any Prospectus, on the date of such Prospectus or amendment or supplement, conformed and will conform in all material respects with the requirements of the Securities Act. At each Advance Notice Date, the Registration Statement, and the Prospectus, as of such date, will conform in all material respects with the requirements of the Securities Act. Each Registration Statement, when it became or becomes effective, did not, and will not, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Each Prospectus did not, or will not, include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The documents incorporated by reference in a Prospectus or any Prospectus Supplement did not, and any further documents filed and incorporated by reference therein will not, when filed with the Commission, contain an untrue statement of a material fact or omit to state a material fact required to be stated in such document or necessary to make the statements in such document, in light of the circumstances under which they were made, not misleading. The foregoing shall not apply to statements in, or omissions from, any such document made in reliance upon, and in conformity with, information furnished to the Company by the Investor specifically for use in the preparation thereof.
Section 5.10 Conformity with Securities Act and Exchange Act. Each Registration Statement, each Prospectus, or any amendment or supplement thereto, and the documents incorporated by reference in each Registration Statement, Prospectus or any amendment or supplement thereto, when such documents were or are filed with the SEC under the Securities Act or the Exchange Act or became or become effective under the Securities Act, as the case may be, conformed or will conform in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable.
Section 5.11 Equity Capitalization. On the date of the closing of the Business Combination, the authorized share capital of the Company shall be provided to the Investor as a supplement hereto prior to the Effective Date. From and after the closing of the Business Combination, the Common Shares are registered pursuant to Section 12(b) of the Exchange Act and will be listed on a Principal Market under the symbol “SMX”. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the Common Shares under the Exchange Act or delisting the Common Shares from the Principal Market, nor has the Company received any notification that the Commission or the Principal Market is contemplating terminating such registration or listing. To the Company’s knowledge, it will be in compliance with all applicable listing requirements of the Principal Market upon the closing of the Business Combination.
Section 5.12 Intellectual Property Rights. The Company and its Subsidiaries own or possess adequate rights or licenses to use all material trademarks, trade names, service marks, service mark registrations, service names, patents, patent rights, copyrights, inventions, licenses, approvals, governmental authorizations, trade secrets and rights, if any, necessary to conduct their respective businesses as now conducted, except as would not cause a Material Adverse Effect. The Company and its Subsidiaries have not received written notice of any infringement by the Company or its Subsidiaries of trademark, trade name rights, patents, patent rights, copyrights, inventions, licenses, service names, service marks, service mark registrations, or trade secrets, except as would not cause a Material Adverse Effect. To the knowledge of the Company, there is no claim, action or proceeding being made or brought against, or to the Company’s knowledge, being threatened against the Company or its Subsidiaries regarding trademark, trade name, patents, patent rights, invention, copyright, license, service names, service marks, service mark registrations, trade secret or other infringement; and, except as would not cause a Material Adverse Effect, the Company is not aware of any facts or circumstances which might give rise to any of the foregoing.
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Section 5.13 Employee Relations. Neither the Company nor any of its Subsidiaries is involved in any labor dispute nor, to the knowledge of the Company or any of its Subsidiaries, is any such dispute threatened, in each case which is reasonably likely to cause a Material Adverse Effect.
Section 5.14 Environmental Laws. The Company and its Subsidiaries (i) have not received written notice alleging any failure to comply in all material respects with all Environmental Laws (as defined below), (ii) have received all permits, licenses or other approvals required of them under applicable Environmental Laws to conduct their respective businesses and (iii) have not received written notice alleging any failure to comply with all terms and conditions of any such permit, license or approval where, in each of the foregoing clauses (i), (ii) and (iii), the failure to so comply would be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. The term “Environmental Laws” means all applicable federal, state and local laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “Hazardous Materials”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.
Section 5.15 Title. Except as would not cause a Material Adverse Effect, the Company (or its Subsidiaries) has indefeasible fee simple or leasehold title to its properties and material assets owned by it, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest other than such as are not material to the business of the Company. Any real property and facilities held under lease by the Company and its Subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and buildings by the Company and its Subsidiaries.
Section 5.16 Insurance. The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged. The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.
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Section 5.17 Regulatory Permits. Except as would not cause a Material Adverse Effect, the Company and its Subsidiaries possess all material certificates, authorizations and permits issued by the appropriate federal, state or foreign regulatory authorities necessary to own their respective businesses, and neither the Company nor any such Subsidiary has received any written notice of proceedings relating to the revocation or modification of any such certificate, authorization or permits.
Section 5.18 Internal Accounting Controls. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences, and management is not aware of any material weaknesses that are not disclosed in the SEC Documents as and when required.
Section 5.19 Absence of Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending against or affecting the Company, the Common Shares or any of the Company’s Subsidiaries, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect.
Section 5.20 Absence of Certain Changes. Since the date of the Company’s most recent audited financial statements contained in a Form 10-K, there has been no Material Adverse Effect. Since the date of the Company’s most recent audited financial statements contained in a Form 10-K, neither the Company nor any of its Subsidiaries has (i) declared or paid any dividends, (ii) sold any material assets, individually or in the aggregate, outside of the ordinary course of business, or (iii) made any material capital expenditures, individually or in the aggregate, outside of the ordinary course of business. Neither the Company nor any of its Subsidiaries has taken any steps to seek protection pursuant to any law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does the Company or any Subsidiary have any knowledge or reason to believe that any of their respective creditors intend to initiate involuntary bankruptcy proceedings
Section 5.21 Subsidiaries. The Company does not presently own or control, directly or indirectly, any interest in any other corporation, partnership, association or other business entity.
Section 5.22 Tax Status. Each of the Company and its Subsidiaries (i) has timely made or filed all foreign, federal and state income and all other tax returns, reports and declarations required by any jurisdiction to which it is subject, (ii) has timely paid all taxes and other governmental assessments and charges that are material in amount, shown or determined to be due on such returns, reports and declarations, except those being contested in good faith and (iii) has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply. The Company has not received written notification of any unpaid taxes in any material amount claimed to be due by the taxing authority of any jurisdiction, and the officers of the Company and its Subsidiaries know of no basis for any such claim where failure to pay would cause a Material Adverse Effect.
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Section 5.23 Certain Transactions. Except as not required to be disclosed pursuant to Applicable Laws, none of the officers or directors of the Company is presently a party to any transaction with the Company (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer or director, or to the knowledge of the Company, any corporation, partnership, trust or other entity in which any officer or director has a substantial interest or is an officer, director, trustee or partner.
Section 5.24 Rights of First Refusal. The Company is not obligated to offer the Common Shares offered hereunder on a right of first refusal basis to any third parties including, but not limited to, current or former shareholders of the Company, underwriters, brokers, agents or other third parties.
Section 5.25 Dilution. The Company is aware and acknowledges that issuance of Common Shares hereunder could cause dilution to existing shareholders and could significantly increase the outstanding number of Common Shares.
Section 5.26 Acknowledgment Regarding Investor’s Purchase of Shares. The Company acknowledges and agrees that the Investor is acting solely in the capacity of an arm’s length investor with respect to this Agreement and the transactions contemplated hereunder. The Company further acknowledges that the Investor is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereunder and any advice given by the Investor or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereunder is merely incidental to the Investor’s purchase of the Shares hereunder or a Promissory Note. The Company is aware and acknowledges that it shall not be able to request Advances under this Agreement if a the Registration Statement is not effective or if any issuances of Common Shares pursuant to any Advances would violate any rules of the Principal Market. The Company acknowledges and agrees that it is capable of evaluating and understanding, and understands and accepts, the terms, risks and conditions of the transactions contemplated by this Agreement.
Section 5.27 Finder’s Fees. Neither the Company nor any of the Subsidiaries has incurred any liability for any finder’s fees, brokerage commissions or similar payments in connection with the transactions herein contemplated.
Section 5.28 Relationship of the Parties. Neither the Company, nor any of its subsidiaries, affiliates, nor any person acting on its or their behalf is a client or customer of the Investor or any of its affiliates and neither the Investor nor any of its affiliates has provided, or will provide, any services to the Company or any of its affiliates, its subsidiaries, or any person acting on its or their behalf. The Investor’s relationship to Company is solely as investor as provided for in the Transaction Documents.
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Section 5.29 Operations. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with and neither the Company nor the Subsidiaries, nor any director, officer, or employee of the Company or any Subsidiary nor, to the Company’s knowledge, any agent, affiliate or other person acting on behalf of the Company or any Subsidiary has, not complied with Applicable Law; and no action, suit or proceeding by or before any governmental authority involving the Company or any of its Subsidiaries with respect to Applicable Laws is pending or, to the knowledge of the Company, threatened.
Section 5.30 Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Registration Statement or a Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
Section 5.31 Compliance with Laws. The Company and each of its Subsidiaries are in compliance with Applicable Laws; the Company has not received a notice of non-compliance, nor knows of, nor has reasonable grounds to know of, any facts that any director, officer, or employee of the Company or any Subsidiary nor, to the Company’s knowledge, any agent, affiliate or other person acting on behalf of the Company or any Subsidiary has, has not complied with Applicable Laws, or could give rise to a notice of non-compliance with Applicable Laws, and is not aware of any pending change or contemplated change to any applicable law or regulation or governmental position; in each case that would have a Material Adverse Effect.
Section 5.32 Sanctions Matters. Neither the Company nor any of its Subsidiaries or, to the knowledge of the Company, any director, officer or controlled affiliate of the Company or any director or officer of any Subsidiary, is a Person that is, or is owned or controlled by a Person that is (i) the subject of any sanctions administered or enforced by the U.S. Department of Treasury’s Office of Foreign Asset Control (“OFAC”), the United Nations Security Council, the European Union, His Majesty’s Treasury, or other relevant sanctions authorities, including, without limitation, designation on OFAC’s Specially Designated Nationals and Blocked Persons List or OFAC’s Foreign Sanctions Evaders List or other relevant sanctions authority (collectively, “Sanctions”), or (ii) located, organized or resident in a country or territory that is the subject of Sanctions that broadly prohibit dealings with that country or territory (including, without limitation, the Crimea region, the Donetsk People’s Republic and Luhansk People’s Republic in Ukraine, Cuba, Iran, North Korea, Russia, Sudan and Syria (the “Sanctioned Countries”)). Neither the Company nor any of its Subsidiaries will, directly or indirectly, use the proceeds from the sale of Advance Shares, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person (a) for the purpose of funding or facilitating any activities or business of or with any Person or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions or is a Sanctioned Country, or (b) in any other manner that will result in a violation of Sanctions or Applicable Laws by any Person (including any Person participating in the transactions contemplated by this Agreement, whether as underwriter, advisor, investor or otherwise). For the past five years, neither the Company nor any of its Subsidiaries has engaged in, and is now not engaged in, any dealings or transactions with any Person, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions or was a Sanctioned Country. Neither the Company nor any of its Subsidiaries nor any director, officer or controlled affiliate of the Company or any of its Subsidiaries, has ever had funds blocked by a United States bank or financial institution, temporarily or otherwise, as a result of OFAC concerns.
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Article VI. Indemnification
The Investor and the Company represent to the other the following with respect to itself:
Section 6.01 Indemnification by the Company. In consideration of the Investor’s execution and delivery of this Agreement and acquiring the Shares hereunder, and in addition to all of the Company’s other obligations under this Agreement, the Company shall defend, protect, indemnify and hold harmless the Investor and its investment manager, Yorkville Advisors Global, LP, and each of their respective officers, directors, managers, members, partners, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) and each person who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “Investor Indemnitees”) from and against any and all actions, causes of action, suits, claims, losses, costs, penalties, fees, liabilities and damages, and reasonable and documented expenses in connection therewith (irrespective of whether any such Investor Indemnitee is a party to the action for which indemnification hereunder is sought), and including reasonable attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred by the Investor Indemnitees or any of them as a result of, or arising out of, or relating to (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement for the registration of the Shares as originally filed or in any amendment thereof, or in any related prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of the Investor specifically for inclusion therein; (b) any material misrepresentation or breach of any material representation or material warranty made by the Company in this Agreement or any other certificate, instrument or document contemplated hereby or thereby; or (c) any material breach of any material covenant, material agreement or material obligation of the Company contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby. To the extent that the foregoing undertaking by the Company may be unenforceable under Applicable Law, the Company shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under Applicable Law.
Section 6.02 Indemnification by the Investor. In consideration of the Company’s execution and delivery of this Agreement, and in addition to all of the Investor’s other obligations under this Agreement, the Investor shall defend, protect, indemnify and hold harmless the Company and all of its officers, directors, shareholders, employees and agents (including, without limitation, those retained in connection with the transactions contemplated by this Agreement) and each person who controls the Investor within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the “Company Indemnitees”) from and against any and all Indemnified
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Liabilities incurred by the Company Indemnitees or any of them as a result of, or arising out of, or relating to (a) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement for the registration of the Shares as originally filed or in any amendment thereof, or in any related prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Investor will only be liable for written information relating to the Investor furnished to the Company by or on behalf of the Investor specifically for inclusion in the documents referred to in the foregoing indemnity, and will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Investor by or on behalf of the Company specifically for inclusion therein; (b) any misrepresentation or breach of any representation or warranty made by the Investor in this Agreement or any instrument or document contemplated hereby or thereby executed by the Investor; or (c) any breach of any covenant, agreement or obligation of the Investor contained in this Agreement or any other certificate, instrument or document contemplated hereby or thereby executed by the Investor. To the extent that the foregoing undertaking by the Investor may be unenforceable under Applicable Laws, the Investor shall make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities, which is permissible under Applicable Laws.
Section 6.03 Notice of Claim. Promptly after receipt by an Investor Indemnitee or Company Indemnitee of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving an Indemnified Liability, such Investor Indemnitee or Company Indemnitee, as applicable, shall, if a claim for an Indemnified Liability in respect thereof is to be made against any indemnifying party under this Article VI, deliver to the indemnifying party a written notice of the commencement thereof; but the failure to so notify the indemnifying party will not relieve it of liability under this Article VI except to the extent the indemnifying party is prejudiced by such failure. The indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually reasonably satisfactory to the indemnifying party and the Investor Indemnitee or Company Indemnitee, as the case may be; provided, however, that an Investor Indemnitee or Company Indemnitee shall have the right to retain its own counsel with the actual and reasonable third party fees and expenses of not more than one counsel for such Investor Indemnitee or Company Indemnitee to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Investor Indemnitee or Company Indemnitee and the indemnifying party would be inappropriate due to actual or potential differing interests between such Investor Indemnitee or Company Indemnitee and any other party represented by such counsel in such proceeding. The Investor Indemnitee or Company Indemnitee shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Investor Indemnitee or Company Indemnitee which relates to such action or claim. The indemnifying party shall keep the Investor Indemnitee or Company Indemnitee reasonably apprised as to the status of the defense or any settlement negotiations with
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respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Investor Indemnitee or Company Indemnitee, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Investor Indemnitee or Company Indemnitee of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Investor Indemnitee or Company Indemnitee with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The indemnification required by this Article VI shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received and payment therefor is due.
Section 6.04 Remedies. The remedies provided for in this Article V are not exclusive and shall not limit any right or remedy which may be available to any indemnified person at law or equity. The obligations of the parties to indemnify or make contribution under this Article VI shall survive expiration or termination of this Agreement.
Section 6.05 Limitation of liability. Notwithstanding the foregoing, no party shall be entitled to recover from the other party for punitive, indirect, incidental or consequential damages.
Article VII.
Covenants
The Company covenants with the Investor, and the Investor covenants with the Company, as follows, which covenants of one party are for the benefit of the other party, during the Commitment
Period:
Section 7.01 Effective Registration Statement. During the Commitment Period, in the event that there are Pre-Paid Advances outstanding, the Company shall maintain the continuous effectiveness of the Registration Statement and each subsequent Registration Statement filed with the SEC under the Securities Act pursuant to and in accordance with the Registration Rights Agreement, provided however, in the event there are no Pre-Paid Advances outstanding, the Company shall only be required to use its commercially reasonable efforts to maintain the continuous effectiveness of the Registration Statement and each subsequent Registration Statement filed with the SEC under the
Securities Act pursuant to and in accordance with the Registration Rights Agreement.
Section 7.02 Registration and Listing. In the event that there are Pre-Paid Advances outstanding, the Company shall cause the Common Shares to continue to be registered as a class of securities under Section 12(b) of the Exchange Act, and to comply with its reporting and filing obligations under the Exchange Act, and shall not take any action or file any document (whether or not permitted by the Securities Act or the Exchange Act) to terminate or suspend such registration or to terminate or suspend its reporting and filing obligations under the Exchange Act or Securities Act, except as permitted herein, provided however if there are no Pre-Paid Advances outstanding the Company shall only be required to use commercially reasonable efforts. In the event that there are Pre-Paid Advances outstanding ,the Company shall continue the listing and trading of its
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Common Shares and the listing of the Shares purchased by the Investor hereunder on the Principal Market and to comply with the Company’s reporting, filing and other obligations under the rules and regulations of the Principal Market, provided however if there are no Pre-Paid Advances outstanding the Company shall only be required to use commercially reasonable efforts. In the event that there are Pre-Paid Advances outstanding, if the Company receives any final and non- appealable notice that the listing or quotation of the Common Shares on the Principal Market shall be terminated on a date certain, the Company shall promptly (and in any case within 24 hours) notify the Investor of such fact in writing and shall cause the Common Shares to be listed or quoted on another Principal Market, provided however if there are no Pre-Paid Advances outstanding the Company shall only be required to use commercially reasonable efforts.
Section 7.03 Blue Sky. The Company shall take such action, if any, as is necessary by the Company in order to obtain an exemption for or to qualify the Shares for sale by the Company to the Investor pursuant to the Transaction Documents, and at the request of the Investor, the subsequent resale of Registrable Securities by the Investor, in each case, under applicable state securities or “Blue Sky” laws and shall provide evidence of any such action so taken to the Investor from time to time during the Commitment Period; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify, (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction.
Section 7.04 Suspension of Registration Statement.
| (a) | Establishment of a Black Out Period. During the Commitment Period, the Company from time to time may suspend the use of a Registration Statement by written notice to the Investor in the event that the Company determines in its sole discretion in good faith that such suspension is necessary to (A) delay the disclosure of material nonpublic information concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company or (B) amend or supplement the Registration Statement or Prospectus so that such Registration Statement or Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (a “Black Out Period”). |
| (b) | No Sales by Investor During the Black Out Period. During such Black Out Period, the Investor agrees not to sell any Common Shares of the Company pursuant to such Registration Statement. |
| (c) | Limitations on the Black Out Period. The Company shall not impose any Black Out Period that is longer than 30 days or in a manner that is more restrictive (including, without limitation, as to duration) than the comparable restrictions that the Company may impose on transfers of the Company’s equity securities by its directors and senior executive officers. In addition, the Company shall not deliver any Advance Notice during any Black Out Period. If the public announcement of such material, nonpublic information is made during a Black Out Period, the Black Out Period shall terminate immediately after such announcement, and the Company shall immediately notify the Investor of the termination of the Black Out Period. |
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Section 7.05 Listing of Common Shares. As of each Advance Notice Date, the Shares to be sold by the Company from time to time hereunder will have been registered under Section 12(b) of the Exchange Act and approved for listing on the Principal Market, subject to official notice of issuance.
Section 7.06 Opinion of Counsel. Prior to the date of the delivery by the Company of the first Advance Notice, the Investor shall have received an opinion letter from counsel to the Company in form and substance reasonably satisfactory to the Investor.
Section 7.07 Exchange Act Registration. The Company will file in a timely manner all reports and other documents required of it as a reporting company under the Exchange Act and will not take any action or file any document (whether or not permitted by Exchange Act or the rules thereunder) to terminate or suspend its reporting and filing obligations under the Exchange Act.
Section 7.08 Transfer Agent Instructions. For any time while there is a Registration Statement in effect for this transaction, the Company shall (if required by the transfer agent for the Common Shares) cause legal counsel for the Company to deliver to the transfer agent for the Common Shares (with a copy to the Investor) instructions to issue Common Shares to the Investor free of restrictive legends upon each Advance if the delivery of such instructions are consistent with Applicable Law.
Section 7.09 Corporate Existence. The Company will use commercially reasonable efforts to preserve and continue the corporate existence of the Company during the Commitment Period.
Section 7.10 Notice of Certain Events Affecting Registration; Suspension of Right to Make an Advance. The Company will promptly notify the Investor, and confirm in writing, upon its becoming aware of the occurrence of any of the following events in respect of a Registration Statement or related Prospectus: (i) receipt of any request for additional information by the SEC or any other Federal or state governmental authority during the period of effectiveness of the Registration Statement or any request for amendments or supplements to the Registration Statement or related Prospectus; (ii) the issuance by the SEC or any other Federal governmental authority of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iii) receipt of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Common Shares for sale in any jurisdiction or the initiation or written threat of any proceeding for such purpose; (iv) the happening of any event that makes any statement made in the Registration Statement or related Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires the making of any changes in the Registration Statement, related Prospectus or documents so that, in the case of the Registration Statement, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and that in the case of the related Prospectus, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or of the necessity to amend the Registration Statement or supplement a related Prospectus to comply with the Securities Act or any
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other law; and (v) the Company’s reasonable determination that a post-effective amendment to the Registration Statement would be appropriate (and the Company will promptly make available to the Investor any such supplement or amendment to the related Prospectus). The Company shall not deliver to the Investor any Advance Notice, and the Company shall not sell any Shares pursuant to any pending Advance Notice (other than as required pursuant to Section 2.02(d)), during the continuation of any of the foregoing events (each of the events described in the immediately preceding clauses (i) through (vii), inclusive, a “Material Outside Event”).
Section 7.11 Consolidation. If an Advance Notice has been delivered to the Investor, then the Company shall not effect any consolidation of the Company with or into, or a transfer of all or substantially all the assets of the Company to another entity before the transaction contemplated in such Advance Notice has been closed in accordance with Section 2.02 hereof, and all Shares in connection with such Advance have been received by the Investor.
Section 7.12 Issuance of the Company’s Common Shares. The issuance and sale of the Common Shares to the Investor hereunder shall be made in accordance with the provisions and requirements of Section 4(a)(2) of the Securities Act and any applicable state securities law.
Section 7.13 Expenses. The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, will pay all expenses incident to the performance of its obligations hereunder, including but not limited to (i) the preparation, printing and filing of the Registration Statement and each amendment and supplement thereto, of each Prospectus and of each amendment and supplement thereto; (ii) the preparation, issuance and delivery of any Shares issued pursuant to this Agreement, (iii) all fees and disbursements of the Company’s counsel, accountants and other advisors (but not, for the avoidance doubt, the fees and disbursements of Investor’s counsel, accountants and other advisors), (iv) the qualification of the Shares under securities laws in accordance with the provisions of this Agreement, including filing fees in connection therewith, (v) the printing and delivery of copies of any Prospectus and any amendments or supplements thereto requested by the Investor, (vi) the fees and expenses incurred in connection with the listing or qualification of the Shares for trading on the Principal Market, or (vii) filing fees of the SEC and the Principal Market.
Section 7.14 Current Report. The Company shall, not later than 9:00 a.m., New York City time, on the fourth business day after the date of this Agreement, file with the SEC a current report on Form 8-K describing all the material terms of the transactions contemplated by the Transaction Documents in the form required by the Exchange Act and attaching all the material Transaction Documents (including any exhibits thereto, the “Current Report”). The Company shall provide the Investor and its legal counsel a reasonable opportunity to comment on a draft of the Current Report prior to filing the Current Report with the SEC and shall give due consideration to all such comments. Effective upon the filing of the Current Report, the Company acknowledges and agrees that any and all confidentiality or similar obligations with respect to the transactions contemplated by the Transaction Documents under any agreement, whether written or oral, between the Company, any of its Subsidiaries or any of their respective officers, directors, affiliates, employees or agents, on the one hand, and Investor or any of its respective officers, directors, affiliates, employees or agents, on the other hand, shall terminate. The Company shall not, and the Company shall cause each of its Subsidiaries and each of its and their respective officers, directors, employees
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and agents not to, provide the Investor with any material, non-public information regarding the Company or any of its Subsidiaries without the express prior written consent of the Investor (which may be granted or withheld in the Investor’s sole discretion). The Company understands and confirms that the Investor will reply on the foregoing representations in effecting resales of Shares.
Section 7.15 Use of Proceeds. The proceeds from the funding of a Pre Paid Advance or the sale of the Shares by the Company to Investor shall be used by the Company in the manner as will be set forth in the Prospectus included in any Registration Statement (and any post-effective amendment thereto) and any Prospectus Supplement thereto filed pursuant to this Agreement. Neither the Company nor any Subsidiary will, directly or indirectly, use the proceeds of the transactions contemplated herein (including any proceeds from the funding of a Pre-Paid Advance) to repay any loans to any executives or employees of the Company or to make any payments in respect of any related party debt; provided that the Company may use up to $500,000 of the proceeds from the transactions contemplated herein (including any proceeds from the funding of a initial Pre-Paid Advance) and no earlier than 6 months from the date hereof up to $500,000 of the proceeds from the transactions contemplated herein (including any proceeds from the funding of a subsequent Pre-Paid Advance) to repay loans, outstanding on the date hereof, to Lionheart Equities, LLC and Lionheart Management LLC, that were made in connection with payments made to extend the life of Lionheart III Corp.
Section 7.16 Compliance with Laws. The Company shall comply in all material respects with all Applicable Laws.
Section 7.17 Market Activities. Neither the Company, nor any Subsidiary, nor any of their respective officers, directors or controlling persons will, directly or indirectly, (i) take any action designed to cause or result in, or that constitutes or might reasonably be expected to constitute or result, in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of Common Shares or (ii) sell, bid for, or purchase Common Shares in violation of Regulation M, or pay anyone any compensation for soliciting purchases of the Shares.
Section 7.18 Trading Information. Upon the Company’s request, the Investor agrees to provide the Company with trading reports setting forth the number and average sales prices of shares of
Common Shares sold by the Investor during the prior trading week.
Section 7.19 Selling Restrictions. (i) Except as expressly set forth below, the Investor covenants that from and after the date hereof through and including the Trading Day next following the expiration or termination of this Agreement as provided in Section 10.01 (the “Restricted Period”), none of the Investor any of its officers, or any entity managed or controlled by the Investor (collectively, the “Restricted Persons” and each of the foregoing is referred to herein as a “Restricted Person”) shall, directly or indirectly, engage in any “short sale” (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of the Common Shares, either for its own principal account or for the principal account of any other Restricted Person. Notwithstanding the foregoing, it is expressly understood and agreed that nothing contained herein shall (without implication that the contrary would otherwise be true) prohibit any Restricted Person during the Restricted Period from: (1) selling “long” (as defined under Rule 200 promulgated under Regulation SHO) the Shares; or (2) selling a number of Common Shares equal to the number of Advance Shares that such Restricted Person is unconditionally obligated to purchase under a pending Advance Notice but has not yet received from the Company or the transfer agent pursuant to this Agreement.
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Section 7.20 Assignment. Neither this Agreement nor any rights or obligations of the parties hereto may be assigned to any other Person.
Section 7.21 No Frustration; No Variable Rate Transactions.
| (a) | No Frustration. The Company shall not enter into, announce or recommend to its stockholders any agreement, plan, arrangement or transaction in or of which the terms thereof would restrict, materially delay, conflict with or impair the ability or right of the Company to perform its obligations under the Transaction Documents to which it is a party, including, without limitation, the obligation of the Company to deliver the Shares to the Investor in respect of a an Advance Notice.. |
| (b) | No Variable Rate Transactions. The Company shall not effect or enter into an agreement to effect any issuance by the Company or any of its Subsidiaries of Common Shares or any security which entitle the holder to acquire Common Stock (or a combination of units thereof) involving a Variable Rate Transaction, other than involving a Variable Rate Transaction with the Investor or with the prior written consent of the Investor. The Investor shall be entitled to seek injunctive relief against the Company and its Subsidiaries to preclude any such issuance, which remedy shall be in addition to any right to collect damages, without the necessity of showing economic loss and without any bond or other security being required. |
Article VIII.
Non Exclusive Agreement
Notwithstanding anything contained herein, this Agreement and the rights awarded to the Investor hereunder are non-exclusive, and the Company may, at any time throughout the term of this Agreement and thereafter, issue and allot, or undertake to issue and allot, any shares and/or securities and/or convertible notes, bonds, debentures, options to acquire shares or other securities and/or other facilities which may be converted into or replaced by Common Shares or other securities of the Company, and to extend, renew and/or recycle any bonds and/or debentures, and/or grant any rights with respect to its existing and/or future share capital.
Article IX.
Choice of Law/Jurisdiction
Section 9.01 This Agreement, and any and all claims, proceedings or causes of action relating to this Agreement or arising from this Agreement or the transactions contemplated herein, including, without limitation, tort claims, statutory claims and contract claims, shall be interpreted, construed, governed and enforced under and solely in accordance with the substantive and procedural laws of the State of New York, in each case as in effect from time to time and as the same may be amended from time to time, and as applied to agreements performed wholly within the State of New York. The Parties further agree that any action between them shall be heard in
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New York County, New York, and expressly consent to the jurisdiction and venue of the Supreme Court of New York, sitting in New York County, New York and the United States District Court of the Southern District of New York, sitting in New York, New York, for the adjudication of any civil action asserted pursuant to this Agreement.
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREIN, THE PERFORMANCE THEREOF OR THE FINANCINGS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS PARAGRAPH.
Article X. Termination
Section 10.01 Termination.
| (a) | Unless earlier terminated as provided hereunder, this Agreement shall terminate automatically on the earliest of (i) the first day of the month next following the 36-month anniversary of the Effective Date, provided that if any Promissory Notes are then outstanding, such termination shall be delayed until such date that all Promissory Notes that were outstanding have been repaid, (ii) the date on which the Investor shall have made payment of Advances pursuant to this Agreement for Common Shares equal to the Commitment Amount, or (iii) the termination of the Business Combination Agreement. |
| (b) | The Company may terminate this Agreement effective upon five Trading Days’ prior written notice to the Investor; provided that (i) there are no outstanding Advance Notices, the Common Shares under which have yet to be issued, (ii) there are no outstanding Promissory Notes, and (iii) the Company has paid all amounts owed to the Investor pursuant to this Agreement. This Agreement may be terminated at any time by the mutual written consent of the parties, effective as of the date of such mutual written consent unless otherwise provided in such written consent. |
| (c) | Nothing in this Section 10.01 shall be deemed to release the Company or the Investor from any liability for any breach under this Agreement, or to impair the rights of the Company and the Investor to compel specific performance by the other party of its obligations under this Agreement. The indemnification provisions contained in Article VI shall survive termination hereunder. |
| (d) | Notwithstanding anything to the contrary in this Agreement, no obligation, including the obligation to issue to the Investor the Commitment Shares, shall arise until the consummation of the Business Combination. If the BCA or the SID is terminated, other than in connection with the consummation of the Business Combination, then this Agreement shall be terminated and of no further effect, without any liability of any Party hereunder. |
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Article XI. Notices
Other than with respect to Advance Notices, which must be in writing and will be deemed delivered on the day set forth in Section 2.01(b), any notices, consents, waivers, or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by e-mail if sent on a Trading Day, or, if not sent on a Trading Day, on the immediately following Trading Day; (iii) 5 days after being sent by U.S. certified mail, return receipt requested, (iv) 1 day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses for such communications (except for Advance Notices which shall be delivered in accordance with Exhibit A hereof) shall be:
If to the Company prior to the consummation of the Business Combination, to:
4218 NE 2nd Avenue
Miami, Florida 33137
Attn: General Counsel
Email: notices@lheartcapital.com
With copies (which shall not
constitute notice or delivery of process) to:
DLA Piper LLP (US)
200 South Biscayne Boulevard, Suite 2500
Miami, FL 33131
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Attention: Joshua M. Samek, Esq.
Email: Joshua.Samek@us.dlapiper.com
If to the Company following the
consummation of the Business
Combination, to:
SMX Public Limited Company
Mespil Business Centre
Mespil House
Sussex Road
Dublin 4
D04 T4A6
Attention: Haggai Alon
Email: haggai@securitymattersltd.com
| With a Copy (which shall not constitute notice or delivery of process) to: |
||
| Aifk &Co., 103 Hahashmonaim St., Tel Aviv, Israel Attn: Doron Afik, Esq. Email: Doron@afiklaw.com | ||
| If to the Investor(s): | YA II PN, Ltd. 1012 Springfield Avenue Mountainside, NJ 07092 Attention: Mark Angelo Portfolio Manager Telephone: (201) 985-8300 Email: mangelo@yorkvilleadvisors.com | |
| With a Copy (which shall not constitute notice or delivery of process) to: |
David Fine, Esq. 1012 Springfield Avenue Mountainside, NJ 07092 Telephone: (201) 985-8300 Email: legal@yorkvilleadvisors.com | |
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or at such other address and/or e-mail and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) electronically generated by the sender’s email service provider containing the time, date, recipient email address or (iii) provided by a nationally recognized overnight delivery service shall be rebuttable evidence of personal service in accordance with clause (i), (ii) or (iii) above, respectively.
Article XII. Miscellaneous
Section 12.01 Counterparts. This Agreement may be executed in identical counterparts, both which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. Facsimile or other electronically scanned and delivered signatures (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com), including by e-mail attachment, shall be deemed to have been duly and validly delivered and be valid and effective for all purposes of this Agreement.
Section 12.02 Entire Agreement; Amendments. This Agreement supersedes all other prior oral or written agreements between the Investor, the Company, their respective affiliates and persons acting on their behalf with respect to the matters discussed herein, and this Agreement contains the entire understanding of the parties with respect to the matters covered herein and, except as specifically set forth herein, neither the Company nor the Investor makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the parties to this Agreement.
Section 12.03 Reporting Entity for the Common Shares. The reporting entity relied upon for the determination of the trading price or trading volume of the Common Shares on any given Trading Day for the purposes of this Agreement shall be Bloomberg, L.P. or any successor thereto. The written mutual consent of the Investor and the Company shall be required to employ any other reporting entity.
Section 12.04 Commitment and Structuring Fee. Each of the Parties shall pay its own fees and expenses (including the fees of any attorneys, accountants, appraisers or others engaged by such Party) in connection with this Agreement and the transactions contemplated hereby, except that (i) the Company shall pay to YA Global II SPV, LLC, a subsidiary of the Investor, a due diligence fee in the amount of $15,000 which has been paid prior to the date hereof, and (ii) subject to the consummation of the Business Combination, the Company shall pay a commitment fee in an amount equal to 1.5% of the Commitment Amount (the “Commitment Fee”) by the issuance to the Investor on the Effective Date of such number of Common Shares that is equal to the Commitment Fee divided by the average of the daily VWAPs of the Common Shares during the 3 Trading Days
immediately following the closing of the Business Combination (collectively, the “Commitment Shares”).
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Section 12.05 Brokerage. Each of the parties hereto represents that it has had no dealings in connection with this transaction with any finder or broker who will demand payment of any fee or commission from the other party. The Company on the one hand, and the Investor, on the other hand, agree to indemnify the other against and hold the other harmless from any and all liabilities to any person claiming brokerage commissions or finder’s fees on account of services purported to have been rendered on behalf of the indemnifying party in connection with this Agreement or the transactions contemplated hereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Reciprocal Standby Equity Purchase Agreement to be executed by the undersigned, thereunto duly authorized, as of the date first set forth above.
| COMPANY: Lionheart III Corp x DocuSigned by: | ||
| By | ||
| Name: | y0fiKiTSi^^ | |
| Title: | Chief Executive Officer | |
| INVESTOR:
YAIIPN, LTD.
| ||
| By: | Yorkville Advisors Global, LP | |
| Its: | Investment Manager | |
| By: | Yorkville Advisors Global II, LLC | |
| Its: | General Partner | |
| By: | /s/ David Gonzalez | |
| Name: | David Gonzalez | |
| Title: | General Counsel | |
| Acknowledged and agreed:
Empatan Public Limited Company | ||
| By: | /s/ Doron A | |
| Name: | Doron A | |
| Title: | Attorney | |
| Security Matters Limited | ||
| By: | /s/ Haggai Alon | |
| Name: | Haggai Alon | |
| Title: | Chief Executive Officer | |
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Execution Version
ANNEX I TO THE
RECIPRICOL STANDBY EQUITY PURCHASE AGREEMENT
DEFINITIONS
“Additional Shares” shall have the meaning set forth in Section 2.01(e)(ii).
“Adjusted Advance Amount” shall have the meaning set forth in Section 2.01(e)(i).
“Advance” shall mean any issuance and sale of Advance Shares by the Company to the Investor pursuant to this Agreement.
“Advance Date” shall mean the first Trading Day after expiration of the applicable Pricing Period for each Advance, provided that, with respect to an Advance pursuant to an Investor Notice, the Advance Date shall be the first Trading Day after the date of delivery of such Investor Notice.
“Advance Notice” shall mean a written notice in the form of Exhibit A attached hereto to the Investor executed by an officer of the Company and setting forth the number of Advance Shares that the Company desires to issue and sell to the Investor.
“Advance Notice Date” shall mean each date the Company is deemed to have delivered (in accordance with Section 2.01(b) of this Agreement) an Advance Notice to the Investor, subject to the terms of this Agreement.
“Advance Shares” shall mean the Common Shares that the Company shall issue and sell to the Investor pursuant to the terms of this Agreement.
“Affiliate” shall have the meaning set forth in Section 4.07.
“Agreement” shall have the meaning set forth in the preamble of this Agreement.
“Applicable Laws” shall mean all applicable laws, statutes, rules, regulations, orders, executive orders, directives, policies, guidelines and codes having the force of law, whether local, national, or international, as amended from time to time, including without limitation (i) all applicable laws that relate to money laundering, terrorist financing, financial record keeping and reporting, (ii) all applicable laws that relate to anti-bribery, anti-corruption, books and records and internal controls, including the United States Foreign Corrupt Practices Act of 1977, and (iii) any Sanctions laws.
“Average Price” means a price per Share equal to the quotient obtained by dividing (i) the aggregate gross purchase price paid by the Investor for all Shares purchased pursuant to this Agreement, by (ii) the aggregate number of Shares issued pursuant to this Agreement.
“Black Out Period” shall have the meaning set forth in Section 7.01.
“Business Combination” shall have the meaning set forth in the preamble of this Agreement.
“Closing” shall have the meaning set forth in Section 2.02.
“Commitment Amount” shall mean $25,000,000 of Common Shares.
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“Commitment Shares” shall have the meaning set forth in Section 12.04
“Commitment Period” shall mean the period commencing on the Effective Date and expiring upon the date of termination of this Agreement in accordance with Section 10.01.
“Common Shares” shall have the meaning set forth in the recitals of this Agreement.
“Common Stock Equivalents” shall mean any securities of the Company or its Subsidiaries which entitle the holder thereof to acquire at any time Common Shares, including, without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Shares
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“Company” shall have the meaning set forth in the preamble of this Agreement.
“Company Indemnitees” shall have the meaning set forth in Section 6.02.
“Condition Satisfaction Date” shall have the meaning set forth in Annex II.
“Conversion Price” shall have the meaning set forth in the Promissory Note.
“Daily Traded Amount” shall mean the daily trading volume of the Company’s Common Shares on the Principal Market during regular trading hours as reported by Bloomberg L.P.
“Disclosure Schedule” shall have the meaning set forth in Article V.
“Effective Date” shall mean the sixth Trading Day following the date of closing of the Business Combination.
“Environmental Laws” shall have the meaning set forth in Section 5.14.
“Event of Default” shall have the meaning set forth in the Promissory Note.
“Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Exchange Cap” shall have the meaning set forth in Section 2.01(c)(iii).
“Excluded Day” shall have the meaning set forth in Section 2.01(e)(i).
“Fixed Price” shall have the meaning set forth in the Promissory Note.
“Hazardous Materials” shall have the meaning set forth in Section 5.14.
“Indemnified Liabilities” shall have the meaning set forth in Section 6.01.
“Investor” shall have the meaning set forth in the preamble of this Agreement.
“Investor Notice” shall have the meaning set forth in Section 3.02.
“Investor Indemnitees” shall have the meaning set forth in Section 6.01.
“Market Price” shall mean an Option 1 Market Price or Option 2 Market Price, as applicable.
“Material Adverse Effect” shall mean any event, occurrence or condition that has had or would reasonably be expected to have (i) a material adverse effect on the legality, validity or enforceability of this Agreement or the transactions contemplated herein, (ii) a material adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and its Subsidiaries, taken as a whole, or (iii) a material adverse effect on the Company’s ability to perform in any material respect on a timely basis its obligations under this Agreement.
“Material Outside Event” shall have the meaning set forth in Section 7.10.
“Maximum Advance Amount” means (i) in respect of each Advance Notice delivered by the Company pursuant to Section 2.01(a)(i) of this Agreement, the greater of: (i) an amount equal to one hundred percent (100%) of the average of the Daily Traded Amount during the five consecutive
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Trading Day immediately preceding an Advance Notice, or (ii) 1 million Common Shares, and (ii) in respect of each Advance Notice deemed delivered by the Company pursuant to an Investor Notice, the amount selected by the Investor in such Investor Notice, which amount shall not exceed the limitations set forth in Section 2.01(c) of this Agreement.
“Minimum Acceptable Price” or “MAP” shall mean the minimum price notified by the Company to the Investor in each Advance Notice, if applicable.
“OFAC” shall have the meaning set forth in Section 5.32.
“Option 1 Market Price” shall mean the VWAP of the Common Shares during the Option 1 Pricing Period.
“Option 2 Market Price” shall mean the lowest daily VWAP of the Common Shares during the Option 2 Pricing Period.
“Option 1 Pricing Period” shall mean the period on the applicable Advance Notice Date with respect to an Advance Notice selecting an Option 1 Pricing Period commencing upon receipt by the Company of written confirmation (which may be by e-mail) of acceptance of such Advance Notice by the Investor (or the open of regular trading hours, if later), and which confirmation shall specify such commencement time, and ending on 4:00 p.m. New York City time on the applicable Advance Notice Date.
“Option 2 Pricing Period” shall mean the three consecutive Trading Days commencing on the Advance Notice Date.
“Ownership Limitation” shall have the meaning set forth in Section 2.01(c)(i).
“Person” shall mean an individual, a corporation, a partnership, a limited liability company, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
“Plan of Distribution” shall mean the section of a Registration Statement disclosing the plan of distribution of the Shares.
“Pre-Advance Closing(s)” shall have the meaning set forth in Section 3.01.
“Pre-Paid Advance” shall mean have the meaning set forth in Section 3.01.
“Pricing Period” shall mean the Option 1 Pricing Period or Option 2 Pricing Period, as applicable.
“Principal Market” shall mean the Nasdaq Stock Market; provided however, that in the event the Common Shares are ever listed or traded on the New York Stock Exchange, or the NYSE American, then the “Principal Market” shall mean such other market or exchange on which the Common Shares are then listed or traded to the extent such other market or exchange is the principal trading market or exchange for the Common Shares.
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“Promissory Note” shall have the meaning set forth in Section 3.01.
“Prospectus” shall mean any prospectus (including, without limitation, all amendments and supplements thereto) used by the Company in connection with a Registration Statement, including documents incorporated by reference therein.
“Prospectus Supplement” shall mean any prospectus supplement to a Prospectus filed with the SEC pursuant to Rule 424(b) under the Securities Act, including, including documents incorporated by reference therein.
“Purchase Price” shall mean (i) the price per Advance Share obtained by multiplying the Market Price by (y) 96% in respect of an Advance Notice with an Option 1 Pricing Period, and (z) 97% in respect of an Advance Notice with an Option 2 Pricing Period, or (ii) in the case of any Advance Notice delivered pursuant to an Investor Notice the Purchase Price set forth in Section 3.02(c).
“Registration Limitation” shall have the meaning set forth in Section 2.01(c)(ii).
“Registration Statement” shall have the meaning set forth in the Registration Rights Agreement.
“Registrable Securities” shall have the meaning set forth in the Registration Rights Agreement.
“Regulation D” shall mean the provisions of Regulation D promulgated under the Securities Act.
“Sanctions” shall have the meaning set forth in Section 5.32.
“Sanctioned Countries” shall have the meaning set forth in Section 5.32.
“SEC” shall mean the U.S. Securities and Exchange Commission.
“SEC Documents” shall mean (1) any registration statement on Form F-4 filed by the Parent with the SEC, including any related prospectus or prospectuses, for the registration of the Common Shares to be issued pursuant to the BCA and the SID, on file with the SEC at the time such registration statement became effective, including the financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of the effective date of such registration statement under the Securities Act, (2) any proxy statement or prospectus filed by the Parent and the Company with the SEC, including all documents incorporated or deemed incorporated therein by reference, whether or not included in a registration statement on Form F-4, in the form in which such proxy statement or prospectus has most recently been filed with the SEC pursuant to Rule 424(b) under the Securities Act, (3) all reports, schedules, registrations, forms, statements, information and other documents filed with or furnished to the SEC by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act during the two years prior to the date hereof, including, without limitation, the Current Report, (4) each Registration Statement, as the same may be amended from time to time, the Prospectus contained therein and each Prospectus Supplement thereto and (5) all information contained in such filings and all documents and disclosures that have been and heretofore shall be incorporated by reference therein.
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“Securities Act” shall have the meaning set forth in the recitals of this Agreement.
“Settlement Document” in respect of an Advance Notice delivered by the Company, shall mean a settlement document in the form set out on Exhibit C, and in respect of an Advance Notice deemed delivered pursuant to an Investor Notice, shall mean the Investor Notice containing the information set forth on Exhibit E.
“Shares” shall mean the Commitment Shares and the Common Shares to be issued from time to time hereunder pursuant to an Advance.
“Subsidiaries” shall mean any Person in which the Company, directly or indirectly, (x) owns a majority of the outstanding capital stock or holds a majority of the equity or similar interest of such Person or (y) controls or operates all or substantially all of the business, operations or administration of such Person, and the foregoing are collectively referred to herein as “Subsidiaries.”
“Trading Day” shall mean any day during which the Principal Market shall be open for business.
“Transaction Documents” means, collectively, this Agreement, the Registration Rights Agreement, any Promissory Notes issued by the Company hereunder, and each of the other agreements and instruments entered into or delivered by any of the parties hereto in connection with the transactions contemplated hereby and thereby, as may be amended from time to time.
“Variable Rate Transaction” shall mean a transaction in which the Company (i) issues or sells any equity or debt securities that are convertible into, exchangeable or exercisable for, or include the right to receive additional Common Shares either (A) at a conversion price, exercise price, exchange rate or other price that is based upon and/or varies with the trading prices of or quotations for the Common Shares at any time after the initial issuance of such equity or debt securities, or (B) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of such equity or debt security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the Common Shares (including, without limitation, any “full ratchet” or “weighted average” antidilution provisions, but not including any standard anti-dilution protection for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction), (ii) enters into any agreement, including but not limited to an “equity line of credit” or other continuous offering or similar offering of Common Shares, or (iii) enters into or effects any forward purchase agreement, equity pre-paid forward transaction or other similar offering of securities where the purchaser of securities of the Company receives an upfront or periodic payment of all, or a portion of, the value of the securities so purchased, and the Company receives proceeds from such purchaser based on a price or value that varies with the trading prices of the Common Shares.
“Volume Threshold” shall mean a number of Common Shares equal to the quotient of (a) the number of Advance Shares requested by the Company in an Advance Notice divided by (b) 0.30.
“VWAP” shall mean for any Trading Day, the daily volume weighted average price of the Common Shares for such Trading Day on the Principal Market during regular trading hours (or such other period in the case of an Option 1 Pricing Period) as reported by Bloomberg L.P through its “AQR” function. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination, recapitalization or other similar transaction during such period.
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Execution Version
ANNEX II TO THE
RECIPRICOL STANDBY EQUITY PURCHASE AGREEMENT
CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO DELIVER AN
ADVANCE NOTICE
The right of the Company to deliver an Advance Notice and the obligations of the Investor hereunder with respect to an Advance are subject to the satisfaction or waiver, on each Advance Notice Date (a “Condition Satisfaction Date”), of each of the following conditions:
| (a) | Accuracy of the Company’s Representations and Warranties. The representations and warranties of the Company in this Agreement shall be true and correct in all material respects as of the Advance Notice Date, except to the extend such representations and warranties are as of another date, such representations and warranties shall be true and correct as of such other date. |
| (b) | Issuance of Commitment Shares. The Company shall have issued the Commitment Shares to an account designated by the Investor on or prior to the date hereof, in accordance with Section 12.04, all of which Commitment Shares shall be fully earned and non-refundable, regardless of whether any Advance Notices are made or settled hereunder or any subsequent termination of this Agreement. |
| (c) | Registration of the Common Shares with the SEC. There is an effective Registration Statement pursuant to which the Investor is permitted to utilize the prospectus thereunder to resell all of the Common Shares issuable pursuant to such Advance Notice. The Current Report shall have been filed with the SEC and the Company shall have filed with the SEC in a timely manner all reports, notices and other documents required under the Exchange Act and applicable SEC regulations during the twelve-month period immediately preceding the applicable Condition Satisfaction Date. |
| (d) | Authority. The Company shall have obtained all permits and qualifications required by any applicable state for the offer and sale of all the Common Shares issuable pursuant to such Advance Notice, or shall have the availability of exemptions therefrom. The sale and issuance of such Common Shares shall be legally permitted by all laws and regulations to which the Company is subject. |
| (e) | Board. The board of directors of the Company has approved the transactions contemplated by the Transaction Documents; said approval has not been amended, rescinded or materially modified and remains in full force and effect as of the date hereof, and a true, correct and complete copy of such resolutions duly adopted by the board of directors of the Company shall have been provided to the Investor. |
| (f) | No Material Outside Event. No Material Outside Event shall have occurred and be continuing. |
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| (g) | Performance by the Company. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior the applicable Condition Satisfaction Date, unless otherwise waived by the Investor. |
| (h) | No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits or directly, materially and adversely affects any of the transactions contemplated by this Agreement. |
| (i) | No Suspension of Trading in or Delisting of Common Shares. Trading in the Common Shares shall not have been suspended by the SEC, the Principal Market or FINRA, the Company shall not have received any final and non-appealable notice that the listing or quotation of the Common Shares on the Principal Market shall be terminated on a date certain (unless, prior to such date certain, the Common Shares is listed or quoted on any subsequent Principal Market), nor shall there have been imposed any suspension of, or restriction on, accepting additional deposits of the Common Shares, electronic trading or book-entry services by DTC with respect to the Common Shares that is continuing, the Company shall not have received any notice from DTC to the effect that a suspension of, or restriction on, accepting additional deposits of the Common Shares, electronic trading or book-entry services by DTC with respect to the Common Shares is being imposed or is contemplated (unless, prior to such suspension or restriction, DTC shall have notified the Company in writing that DTC has determined not to impose any such suspension or restriction). |
| (j) | Authorized. All of the Shares issuable pursuant to the applicable Advance Notice shall have been duly authorized by all necessary corporate action of the Company. All Shares relating to all prior Advance Notices required to have been received by the Investor under this Agreement shall have been delivered to the Investor in accordance with this Agreement. |
| (k) | Executed Advance Notice. The representations contained in the applicable Advance Notice shall be true and correct in all material respects as of the applicable Condition Satisfaction Date. |
| (l) | No Outstanding Promissory Notes. Except pursuant to an Investor Notice, there shall not be any balance remaining outstanding under a Promissory Note. |
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ANNEX III TO THE
RECIPRICOL STANDBY EQUITY PURCHASE AGREEMENT
CONDITIONS PRECEDENT TO THE INVESTOR’S OBLGATION TO FUND A PRE-
PAID ADVANCE
The obligation of the Investor to advance to the Company a Pre-Paid Advance hereunder at each Pre-Advance Closing is subject to the satisfaction, as of the date of each Pre-Advance Closing, of each of the following conditions, provided that these conditions are for the Investor’s sole benefit and may be waived by the Investor at any time in its sole discretion by providing the Company with prior written notice thereof:
| (a) | The Company shall have duly executed and delivered to the Investor each of the Transaction Documents to which it is a party and the Company shall have duly executed and delivered to the Investor a Promissory Note with a principal amount corresponding to the amount of the applicable Pre-Paid Advance (before any deductions made thereto). |
| (b) | The Investor shall have received written confirmation, to the Investor’s sole satisfaction, that the maturity of any and all debt, including but not limited to the bridge loans with (i) Journee Investments, (ii) Afik Investments, (ii) 33 Capital/Ohad Betzaig, (iv) Amos Rabber, (v) Alberto Morales, (vi) Boon Hui Khoo, (vii) Bassat Investment, (viii) Harold Charles Mitchell Investment, (ix) Mulloway Investment, (x) PMB Partners LP, (xi) MHM Fasteners Ltd. (xii) Kyle Hoffman and(xiii) Kimea have been extended to March 2024 or can be satisfied with equity no earlier than six months from each proposed Pre-Advance Closing. |
| (c) | The Investor shall have received and opinion of counsel to the Company, dated as of the Pre-Advance Closing date, in the form reasonably acceptable to the Investor. |
| (d) | The Investor shall have received a closing statement in a form to be agreed by the parties, duly executed by an officer of the Company, setting forth wire transfer instructions of the Company for the payment of the amount of the Pre-Paid Advance, the amount to be paid by the Investor, which shall be 92% of the full amount of the Pre-Paid Advance, and any other deductions that may be agreed by the parties. |
| (e) | The Company shall have delivered, unless available through EDGAR, to the Investor copies of its and each Subsidiaries certified copies of its charter, as well as any shareholder or operating agreements by or among the shareholders or members of any of the Company’s Subsidiaries. |
| (f) | The Company shall have delivered to the Investor a certificate evidencing the incorporation and good standing of the Company as of a date within ten (10) days of the Pre-Advance Closing date. |
| (g) | The board of directors of the Company has approved the transactions contemplated by the Transaction Documents; said approval has not been amended, rescinded or materially modified and remains in full force and effect as of the date hereof, and a true, correct and complete copy of such resolutions duly adopted by the board of directors of the Company shall have been provided to the Investor. |
| (h) | Each and every representation and warranty of the Company shall be true and correct in all material respects (other than representations and warranties qualified by materiality, which shall be true and correct in all respects) as of the date when made and as of the date of the Pre-Advance Closing as though originally made at that time (except for representations and warranties that speak as of a specific date, which shall be true and correct as of such specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions set forth in each Transaction Document required to be performed, satisfied or complied with by the Company at or prior to the applicable Pre-Advance Closing date. |
| (i) | No Suspension of Trading in or Delisting of Common Shares. Trading in the Common Shares shall not have been suspended by the SEC, the Principal Market or FINRA, the Company shall not have received any final and non-appealable notice that the listing or quotation of the Common Shares on the Principal Market shall be terminated on a date certain (unless, prior to such date certain, the Common Shares is listed or quoted on any subsequent Principal Market), nor shall there have been imposed any suspension of, or restriction on, accepting additional deposits of the Common Shares, electronic trading or book-entry services by DTC with respect to the Common Shares that is continuing, the Company shall not have received any notice from DTC to the effect that a suspension of, or restriction on, accepting additional deposits of the Common Shares, electronic trading or book-entry services by DTC with respect to the Common Shares is being imposed or is contemplated (unless, prior to such suspension or restriction, DTC shall have notified the Company in writing that DTC has determined not to impose any such suspension or restriction). |
| (j) | The Company shall have obtained all governmental, regulatory or third-party consents and approvals, if any, necessary for the sale of the Common Shares, including without limitation, those required by the Principal Market, if any. |
| (k) | No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental entity of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents. |
| (l) | Since the date of execution of this Agreement, no event or series of events shall have occurred that has resulted in or would reasonably be expected to result in a Material Adverse Effect, or an Event of Default. |
| (m) | The Company shall have notified the Principal Market of the issuance of all of the Shares hereunder, the Principal Market shall have completed its review of the related Listing of Additional Share form and the Company shall have obtained approval of the Principal Market to list or designate for quotation (as the case may be) the maximum number of Common Shares issuable pursuant to the Promissory Notes to be issued at such Pre- Advance Closing. |
| (n) | The Company shall have consummated the Business Combination on the terms and conditions set forth in the BCA and the SID and there shall have been no amendment, waiver or modification to the BCA or the SID since the date hereof that materially and adversely affects the economic benefits that the Investor would reasonably expect to receive in connection with the transaction, except to the extent consented to in writing by the Investor. |
| (o) | The Company shall have delivered to the Investor a compliance certificate executed by the chief executive officer of the Company certifying that Company has complied with all of the conditions precedent to the applicable Pre-Advance Closing set forth herein and which may be relied upon by the Investor as evidence of satisfaction of such conditions without any obligation to independently verify. |
| (p) | The Company and its Subsidiaries shall have delivered to the Investor such other documents, instruments or certificates relating to the transactions contemplated by this Agreement as the Investor or its counsel may reasonably request. |
| (a) | Solely with respect to the Second Pre-Advance Closing, the Registration Statement shall be effective in accordance with the provisions set forth in the Registration Rights Agreement, including the effectiveness deadline set froth therein. |
EXHIBIT A
REGISTRATION RIGHTS AGREMEENT
Execution Version
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”) dated as of February 23, 2023 is made by and between YA II PN, LTD., a Cayman Islands exempt limited partnership (the “Investor”), and LIONHEART III CORP, a company incorporated under the laws of the State of Delaware (the “Company”). For purposes of this Agreement, references to the “Company” shall also include, after the closing of the Business Combination (as defined below), Empatan Public Limited Company, a public limited company organized under the laws of Ireland (the “Parent”), pursuant to the transactions contemplated by that certain (i) Business Combination Agreement (as it may be amended or supplemented from time to time, the “BCA”), by and among the Company, the Parent, Security Matters Limited, a publicly traded company on the Australian Securities Exchange (“SMX”), and Aryeh Merger Sub, Inc., a company incorporated under the laws of the State of Delaware (“Merger Sub”) and a wholly owned subsidiary of the Parent, pursuant to which, upon the terms and subject to the conditions contained therein, Merger Sub shall be merged with and into the Company, with the Company continuing as a wholly owned subsidiary of the Parent; and (ii) that certain scheme implementation deed (“SID”) by and among the Company, SMX and Parent, resulting in SMX becoming a wholly owned subsidiary of the Parent. The transactions contemplated by the BCA and the SID (collectively, the “Business Combination”). In connection with the Business Combination, the Parent will change its corporate name to “SMX (Security Matters) PLC.” The business combination and the other transactions described in the BCA and the SID are collectively referred to herein as the “Business Combination.” The Investor and the Company may be referred to herein individually as a “Party” and collectively as the “Parties.”
WHEREAS, the Company and the Investor have entered into that certain Reciprocal Standby Equity Purchase Agreement, dated as of the date hereof (the “Purchase Agreement”), pursuant to which the Company may issue, from time to time, to the Investor up to $25 million of newly issued shares of the Company’s ordinary shares, par value $0.0001 per share (the “Common Stock”); and
WHEREAS, pursuant to the terms of, and in consideration for the Investor entering into, the Purchase Agreement, and to induce the Investor to execute and deliver the Purchase Agreement, the Company has agreed to provide the Investor with certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “Securities Act”).
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Investors hereby agree as follows:
1. DEFINITIONS.
Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:
(a) “Effectiveness Deadline” means, with respect to a Registration Statement filed hereunder: (i) in the event there is no Pre-Paid Advance (as defined in the Purchase Agreement) outstanding, the 30th calendar day following the initial filing of the Registration Statement, or such longer period until the U.S. Securities and Exchange Commission (“SEC”) has confirmed to the Company that such Registration Statement is no longer subject to further review and comments; or (ii) in the event that there is a Pre-Paid Advance outstanding, the 30th calendar day following the date hereof, or such longer period until the SEC has confirmed to the Company that such Registration Statement is no longer subject to further review and comments; provided further, however, in the event the Company is notified by the SEC that one of the Registration Statements, as defined below, will not be reviewed or is no longer subject to further review and comments, the Effectiveness Deadline as to such Registration Statement shall be the fifth business day following the date on which the Company is so notified if such date precedes the date required above.
(b) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
(c) “Filing Deadline” means, with respect to the initial Registration Statement required hereunder, if there is a Pre-Paid Advance outstanding the 15th business day following the date hereof, or if there is no Pre-Paid Advance outstanding and the Required Financial Statements have not been made available to the Company by the 5th business day following the date hereof, the 10th business day following receipt of the Required Financial Statements.
(d) “Person” means a corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.
(e) “Prospectus” means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.
(f) “Registrable Securities” means all of (i) the Shares and Commitment Shares, (ii) any capital stock issued or issuable with respect to the Shares and Commitment Shares, including, without limitation, (1) as a result of any stock split, stock dividend or other distribution, recapitalization or similar event or otherwise, and (2) shares of capital stock of the Company into which the shares of Common Stock are converted or exchanged and shares of capital stock of a successor entity into which the shares of Common Stock are converted or exchanged.
(g) “Registration Statement” means any registration statement of the Company, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.
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(h) “Required Financial Statements” means all of the financial statements required by relevant securities law and regulations to be included in a registration statement for the offering of the Registrable Securities, including the financial statement requirements for securities offerings pursuant to Form F-1 and/or Form 20-F.
(i) “Rule 144” means Rule 144 under the Securities Act or any successor rule thereto.
(j) “Rule 415” means Rule 415 promulgated by the SEC pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC having substantially the same purpose and effect as such Rule.
(k) “SEC” means the Securities and Exchange Commission or any other federal agency administering the Securities Act and the Exchange Act at the time.
(l) “Securities Act” shall have the meaning set forth in the Recitals above.
| 2. | REGISTRATION. |
(a) The Company’s registration obligations set forth in this Section 2 including its obligations to file Registration Statements, obtain effectiveness of Registration Statements, and maintain the continuous effectiveness of any Registration Statement that has been declared effective shall begin on the date hereof and continue until all the earlier of (i) the date on which the Investor has sold all of the Registrable Securities and (ii) the date of termination of the Purchase Agreement if as of such termination date the Investor holds no Registrable Securities (the “Registration Period”).
(b) Subject to the terms and conditions of this Agreement, the Company shall (i) as soon as practicable, but in no case later than the Filing Deadline, prepare and file with the SEC an initial Registration Statement on Form F-3 (or, if the Company is not then eligible, on Form F-1) or any successor form thereto covering the resale by the Investor of the maximum number of Registrable Securities as shall be permitted to be included thereon in accordance with applicable SEC rules, regulations and interpretations so as to permit the resale of such Registrable Securities by the Investor under Rule 415 at then prevailing market prices (and not fixed prices). Each Registration Statement shall contain “Selling Stockholders” and “Plan of Distribution” sections. The Company shall use its commercially reasonable best efforts to have the Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Effectiveness Deadline. By 9:30 am on the business day following the date of effectiveness, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final Prospectus to be used in connection with sales pursuant to such Registration Statement. Prior to the filing of the Registration Statement with the SEC, the Company shall furnish a draft of the Registration Statement to the Investor for their review and comment. The Investor shall furnish comments on the Registration Statement to the Company within 24 hours of the receipt thereof from the Company.
(c) Required Financial Statements. Notwithstanding any other provision in this Agreement, in the event there is no Pre-Paid Advance outstanding, the Company will not be required to file an initial Registration Statement by the Filing Deadline unless it has received the Required Financial Statements at least 10 business days prior to the Filing Deadline. In the event there is a Pre-Paid Advance outstanding, the Company acknowledges and agrees that it will file the initial Registration Statement pursuant to Section 1(c) herein.
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(d) Sufficient Number of Shares Registered. If at any time all Registrable Securities are not covered by a Registration Statement filed pursuant to Section 2(a) as a result of Section 2(f) or otherwise, the Company shall use its commercially reasonable efforts to file with the SEC one or more additional Registration Statements so as to cover all of the Registrable Securities not covered by such initial Registration Statement, in each case as soon as practicable (taking into account any position of the staff of the SEC with respect to the date on which the Staff will permit such additional Registration Statement(s) to be filed with the SEC and the rules and regulations of the SEC). The Company shall use its commercially reasonable efforts to cause each such new Registration Statement to become effective as soon as reasonably practicable following the filling thereof with the SEC.
(e) During the Registration Period, the Company shall (i) promptly prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the Prospectus used in connection with a Registration Statement, which Prospectus is to be filed pursuant to Rule 424 promulgated under the Securities Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, (ii) prepare and file with the SEC additional Registration Statements in order to register for resale under the Securities Act all of the Registrable Securities; (iii) cause the related Prospectus to be amended or supplemented by any required Prospectus supplement (subject to the terms of this Agreement), and as so supplemented or amended to be filed pursuant to Rule 424; (iv) respond as promptly as reasonably possible to any comments received from the SEC with respect to a Registration Statement or any amendment thereto and as promptly as reasonably possible provide the Investor true and complete copies of all correspondence from and to the SEC relating to a Registration Statement (provided that the Company may excise any information contained therein which would constitute material non-public information as to any Investor which has not executed a confidentiality agreement with the Company); and (v) comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement. In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 2(c)) by reason of the Company’s filing a report on Form 20-F, or Form 6-K or any analogous report under the Exchange Act, the Company shall incorporate such report by reference into the Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the Exchange Act report is filed which created the requirement for the Company to amend or supplement the Registration Statement.
(f) Reduction of Registrable Securities Included in a Registration Statement. Notwithstanding anything contained herein, in the event that the SEC requires the Company to reduce the number of Registrable Securities to be included in a Registration Statement in order to allow the Company to rely on Rule 415 with respect to a Registration Statement, then the Company shall be obligated to include in such Registration Statement (which may be a subsequent Registration Statement if the Company needs to withdraw a Registration Statement and refile a new Registration Statement in order to rely on Rule 415) only such limited portion of the Registrable Securities as the SEC shall permit, provided however, that the Company shall use reasonable best efforts to seek the approval of the maximum number of Registrable Securities permitted by the SEC and under applicable law. Any Registrable Securities that are excluded in accordance with the foregoing terms are hereinafter referred to as “Cut Back Securities.” To the extent Cut Back Securities exist,
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promptly following such time as may be permitted by the SEC, the Company shall be required to file a Registration Statement covering the resale of the Cut Back Securities (subject also to the terms of this Section) and shall use commercially reasonable efforts to cause such Registration Statement to be declared effective as promptly as practicable thereafter. Provided there are no Pre-Paid Advances outstanding, if the inclusion on a registration statement of any of the Registrable Securities is impermissible for any reason whatsoever (whether by law, or any interpretation or comment issued by the SEC) or the Company determines that it is required or desirable to reduce or eliminate any Registrable Securities from a registration statement, then the Company shall withdraw or reduce (as appliable), and shall not seek to register on a registration statement, such shares.
(g) Failure to File or Obtain Effectiveness of the Registration Statement or Remain Current. If: (i) a Registration Statement is not filed on or prior to its Filing Date, or (ii) a Registration Statement is not declared effective on or prior to Effectiveness Deadline or the Company fails to file with the SEC a request for acceleration in accordance with Rule 461 promulgated under the Securities Act, within five business days of the date that the Company is notified (orally or in writing, whichever is earlier) by the SEC that a Registration Statement will not be “reviewed,” or not subject to further review, or (iii) after the effectiveness, a Registration Statement ceases for any reason to remain continuously effective as to all Registrable Securities for which it is required to be effective, or (iv) the Investor is not permitted to utilize the Prospectus therein to resell such Registrable Securities for more than 30 consecutive calendar days or more than an aggregate of 40 calendar days during any 12-month period (which need not be consecutive calendar days), or (v) if after the date that is six months from the date hereof, the Company does not have available adequate current public information as set forth in Rule 144(c) (any such failure or breach being referred to as an “Event”), then in addition to any other rights the Investor may have hereunder or under applicable law, the Company shall be in breach of the term and conditions of this Agreement and such Event shall be deemed an event of default for so long as such Event remains uncured.
(h) Piggy-Back Registrations. If at any time there is not an effective Registration Statement covering all of the Registrable Securities and the Company proposes to register the offer and sale of any shares of its Common Stock under the Securities Act (other than a registration (i) pursuant to a Registration Statement on Form S-8 ((or other registration solely relating to an offering or sale to employees or directors of the Company pursuant to any employee stock plan or other employee benefit arrangement), (ii) pursuant to a Registration
Statement on Form F-4 (or similar form that relates to a transaction subject to Rule 145 under the Securities Act or any successor rule thereto), or (iii) in connection with any dividend or distribution reinvestment or similar plan), whether for its own account or for the account of one or more stockholders of the Company and the form of Registration Statement to be used may be used for any registration of Registrable Securities, the Company shall give prompt written notice (in any event no later than five days prior to the filing of such Registration Statement) to the holders of Registrable Securities of its intention to effect such a registration and, shall include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion from the holders of Registrable Securities; provided, however, that, the Company shall not be required to register any Registrable Securities pursuant to this Section 10(c) that have been sold or may permanently be sold without any restrictions pursuant to Rule 144, as determined by the counsel to the Company pursuant to a written opinion letter to such effect (based upon such representations of the Company and the Investor as such counsel may reasonably request), addressed and reasonably acceptable to the Company’s transfer agent.
(i) No Inclusion of Other Securities. In no event shall the Company include any securities other than Registrable Securities on any Registration Statement pursuant to Section 2(a) or Section 2(d) without notifying the Investor prior to filing such Registration Statement with the SEC.
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(j) Suspension of Prospectus. For not more than fifteen (15) consecutive days or for a total of not more than thirty (30) days in any twelve (12) month period, the Company may suspend the use of any Prospectus included in any Registration Statement contemplated by this Section in the event that the Company determines in good faith that such suspension is necessary to (A) delay the disclosure of material nonpublic information concerning the Company, the disclosure of which at the time is not, in the good faith opinion of the Company, in the best interests of the Company or (B) amend or supplement the affected Registration Statement or the related Prospectus so that such Registration Statement or Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the case of the Prospectus in light of the circumstances under which they were made, not misleading (an “Allowed Delay”); provided, that the Company shall promptly (a) notify each Investor in writing of the commencement (and the termination) of an Allowed Delay, but shall not (without the prior written consent of an Investor) disclose to such Investor any material nonpublic information giving rise to an Allowed Delay, (b) advise the Investors in writing to cease all sales under such Registration Statement until the end of the Allowed Delay, and (c) use commercially reasonable efforts to terminate an Allowed Delay as promptly as practicable.
3. RELATED OBLIGATIONS.
(a) The Company shall, not less than three business days prior to the filing of each Registration Statement and not less than one Trading Day prior to the filing of any related amendments and supplements to all Registration Statements (except for supplements and amendments to update the Registration Statement solely for information reflected in the Company’s annual reports on Form 20-F, semi-annual reports filed on Form 6-K or other current reports on Form 6-K), furnish to each Investor copies of all such documents proposed to be filed, which documents (other than those incorporated or deemed to be incorporated by reference) will be subject to the reasonable and prompt review of such Investor. The Investor shall furnish comments on the Registration Statement to the Company within 24 hours of the receipt thereof from the Company and amendments or supplements thereto within 12 hours of the receipt thereof from the Company. The Company shall not file a Registration Statement or any such Prospectus or any amendments or supplements thereto to which the Investor shall reasonably object in good faith; provided that, the Company is notified of such objection in writing no later than two (2) business days after the Investor has been so furnished copies of a Registration Statement, provided further that the Company shall not be in breach of this Agreement if failure to meet the deadlines specified in Section 2(g) are due to any such objection by the Investor
(b) The Company shall furnish to each Investor whose Registrable Securities are included in any Registration Statement, without charge, (i) at least one copy of such Registration Statement as declared effective by the SEC and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, all exhibits and each preliminary prospectus, (ii) ten copies of the final prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request) and (iii) such other documents, which are not publicly available through EDGAR, as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.
(c) In the event there are Pre-Paid Advances outstanding, the Company shall (i) register and qualify the Registrable Securities covered by a Registration Statement under such other securities or “blue sky” laws of such jurisdictions in the United States as any Investor
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reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including posteffective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (w) make any change to its articles of incorporation or by-laws, (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(c), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction. Provided however if there are no Pre-Paid Advances outstanding the Company shall only be required to use commercially reasonable efforts to comply with subsection (i), (ii), (iii) and (iv) herein. The Company shall promptly notify each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or “blue sky” laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
(d) The Company shall promptly notify the Investor, at any time prior to the end of the Registration Period, upon discovery that, or upon of the happening of any event as a result of which the Prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and promptly prepare, file with the SEC and furnish to the Investor a supplement to or amendment of such Prospectus as may be necessary so that such Prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. The Company shall also promptly notify each Investor in writing (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to each Investor by facsimile on the same day of such effectiveness), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company’s reasonable determination that a post-effective amendment to a Registration Statement would be appropriate. The Company shall respond as promptly as reasonably practicable to any comments received from the SEC with respect to a Registration Statement or any amendment thereto.
(e) In the event there are Pre-Paid Advances outstanding, the Company shall prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction within the United States of America and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment, provided however if there are no Pre-Paid Advances outstanding the Company shall only be required to use commercially reasonable efforts to comply. In the event such stop order or suspension is issued the Company shall notify each Investor who holds Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.
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(f) In the event there are Pre-Paid Advances outstanding, the Company shall cause all of the Registrable Securities to be listed on each securities exchange on which the Common Stock is then listed as provided for in section 7.02 of the Purchase Agreement, provided however if there are no Pre-Paid Advances outstanding the Company shall only be required to use commercially reasonable efforts. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(f).
(g) The Company shall hold in confidence and not make any disclosure of information concerning the Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at the Investor’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.
(h) The Company shall cooperate with the holders of the Registrable Securities to facilitate the timely preparation and delivery of certificates representing the Registrable Securities to be sold pursuant to such Registration Statement or Rule 144 free of any restrictive legends and representing such number of shares of Common Stock and registered in such names as the holders of the Registrable Securities may reasonably request a reasonable period of time prior to sales of Registrable Securities pursuant to such Registration Statement or Rule; provided, that the Company may satisfy its obligations hereunder without issuing physical stock certificates through the use of The Depository Trust Company’s Direct Registration System.
(i) In the event there are Pre-Paid Advances outstanding, the Company shall cause the Registrable Securities to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities, provided however if there are no Pre-Paid Advances outstanding the Company shall only be required to use commercially reasonable efforts.
(j) In the event there are Pre-Paid Advances outstanding, the Company shall comply with all applicable rules and regulations of the SEC in connection with any registration hereunder, provided however if there are no Pre-Paid Advances outstanding the Company shall only be required to use commercially reasonable efforts.
(k) Within two business days after a Registration Statement which covers Registrable Securities is declared effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investor whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC.
(l) The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by each Investor of Registrable Securities pursuant to a Registration Statement.
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4. OBLIGATIONS OF THE INVESTOR.
(a) The Investor agrees that, upon receipt of any notice from the Company of either (i) the commencement of an Allowed Delay pursuant to Section 2(i) or (ii) the happening of any event pursuant to Section 3(d) hereof, such Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement covering such Registrable Securities until the Investor’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(d) or receipt of notice that no supplement or amendment is required. Notwithstanding anything to the contrary, subject to compliance with the securities laws, the Company shall cause its transfer agent to deliver unlegended certificates for shares of Common Stock to a transferee of an Investor in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor’s receipt of such notice from the Company for which the Investor has not yet settled.
(b) The Investor covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement.
(c) The Investor, by its acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of each Registration Statement hereunder, unless the Investor has notified the Company in writing of the Investor’s election to exclude all of the Investor’s Registrable Securities from such Registration Statement.
5. EXPENSES OF REGISTRATION.
All expenses incurred by the Company in complying with its obligations pursuant to this Agreement and in connection with the registration and disposition of Registrable Securities shall be paid by the Company, including, without limitation, all registration, listing and qualifications fees, printers, fees and expenses of the Company’s counsel and accountants (except legal fees of Investor’s counsel associated with the review of the Registration Statement).
6. INDEMNIFICATION.
With respect to Registrable Securities which are included in a Registration Statement under this Agreement:
(a) To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investor, the directors, officers, partners, employees, agents, representatives of, and each Person, if any, who controls any Investor within the meaning of the Securities Act or the Exchange Act (each, an “Indemnified Person”), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys’ fees, amounts paid in settlement or expenses, joint or several (collectively, “Claims”) incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto (“Indemnified Damages”), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other “blue sky” laws of any jurisdiction in which Registrable Securities are offered (“Blue Sky Filing”), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) any untrue statement or alleged untrue statement of a material fact contained in any final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state
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therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any other law, including, without limitation, any state securities law, or any rule or regulation there under relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing clauses (i) through (iii) being, collectively, “Violations”). The Company shall reimburse the Investors and each such controlling person promptly as such expenses are incurred and are due and payable, for any legal fees or disbursements or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (x) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; (y) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(c); and (z) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person.
(b) In connection with a Registration Statement, the Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers, employees, representatives, or agents and each Person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act (each an “Indemnified Party”), against any Claim or Indemnified Damages to which any of them may become subject, under the Securities Act, the Exchange Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or is based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(d), such Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(b) with respect to any prospectus shall not inure to the benefit of any Indemnified Party if the untrue statement or omission of material fact contained in the prospectus was corrected and such new prospectus was delivered to each Investor prior to such Investor’s use of the prospectus to which the Claim relates.
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(c) Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not more than one (1) counsel for such Indemnified Person or Indemnified Party to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim. The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto. No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent; provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent. No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or litigation. Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.
(d) The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.
(e) The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.
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8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investor the benefits of Rule 144 promulgated under the Securities Act or any similar rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to the public without registration, and as a material inducement to the Investor’s purchase of the Convertible Debentures, the Company represents, warrants, and covenants to the following:
(a) The Company is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and has filed all required reports under Section 13 or 15(d) of the Exchange Act during the 12 months prior to the date hereof (or for such shorter period that the issuer was required to file such reports), other than Form 6-K reports.
(b) During the Registration Period, the Company shall file with the SEC in a timely manner all required reports under Section 13 or 15(d) of the Exchange Act (it being understood that nothing herein shall limit the Company’s obligations under the Purchase Agreement) and such reports shall conform to the requirement of the Exchange Act and the SEC for filing thereunder.
(c) The Company shall furnish to the Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration.
9. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and Investor who then hold at least two-thirds (2/3) of the Registrable Securities. Any amendment or waiver effected in accordance with this Section 9 shall be binding upon each Investor and the Company. No such amendment shall be effective to the extent that it applies to fewer than all of the holders of the Registrable Securities. No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of any of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.
10. MISCELLANEOUS.
(a) A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities or owns the right to receive the Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.
(b) No Other Registrations. The Company shall not file any other registration statements on Form F-3, Form F-1, or otherwise until the initial Registration Statement required hereunder is declared effective by the SEC, provided that this Section 10(b) shall not prohibit the Company from filing amendments to registration statements already filed. The Company shall not include any other securities on a Registration Statement unless otherwise agreed by the Investor.
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(c) Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered pursuant to the notice provisions of the Purchase Agreement or to such other address and/or electronic mail address and/or to the attention of such other person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change. Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) electronically generated by the sender’s email service provider containing the time, date, and recipient email or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with this section.
(d) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.
(e) The laws of the State of New York shall govern all issues concerning the relative rights of the Company and the Investors as its stockholders. All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the Supreme Court of the State of New York, sitting in New York County, New York and federal courts for the Southern District of New York sitting New York, New York, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
(f) This Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.
(g) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.
(h) This Agreement may be executed in identical counterparts, both which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. Facsimile or other electronically scanned and delivered signatures (including any electronic signature covered by the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act, the Electronic Signatures and Records Act or other applicable law, e.g., www.docusign.com), including by e-mail attachment, shall be deemed to have been duly and validly delivered and be valid and effective for all purposes of this Agreement.
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(i) Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.
(j) The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.
(k) This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Investor and the Company have caused their signature page to this Registration Rights Agreement to be duly executed as of the date first above written.
| COMPANY: | ||
| LIONHEART III CORP. | ||
| By | ||
| Name: | Upli | |
| Title: | Chief Executive Officer | |
| INVESTOR: | ||||
| YAIIPN, LTD. | ||||
| By: | Yorkville Advisors Global, LP | |||
| Its: | Investment Manager | |||
| By: | Yorkville Advisors Global II, LLC | |||
| Its: | General Partner | |||
| By: | /s/ David Gonzalez | |||
| Name: | David Gonzalez | |||
| Title: | General Counsel | |||
| Acknowledged and agreed: | ||
| Empatan Public Limited Com | ||
| By: | /s/ Doron A | |
| Name: | Doron A | |
| Title: | Attorney | |
| Security Matters Limited | ||
| By: | /s/ Haggai Alon | |
| Name: | Haggai Alon | |
| Title: | Chief Executive Officer | |
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EXHIBIT B
ADVANCE NOTICE
Dated: Advance Notice Number:
The undersigned, , hereby certifies, with respect to the sale of Common Shares of SMX Public Limited Company (the “Company”) issuable in connection with this Advance Notice, delivered pursuant to that certain Reciprocal Standby Equity Purchase Agreement, dated as of [] (the “Agreement”), as follows (with capitalized terms used herein without definition having the same meanings as given to them in the Agreement):
1. The undersigned is the duly elected of the Company.
2. There are no fundamental changes to the information set forth in the Registration Statement which would require the Company to file a post-effective amendment to the Registration Statement.
3. The Company has performed in all material respects all covenants and agreements to be performed by the Company contained in this Agreement on or prior to the Advance Notice Date. All conditions to the delivery of this Advance Notice are satisfied as of the date hereof.
4. The number of Advance Shares the Company is requesting is .
5. The Pricing Period for this Advance shall be an [Option 1 Pricing Period]/[Option 2 Pricing Period.
6. (For an Option 1 Pricing Period Add:) The Volume Threshold for this Advance shall be ]. (For an Option 2 Pricing Period Add:) The Minimum Acceptable Price with respect to this Advance Notice is (if left blank then no Minimum Acceptable Price will be applicable to this Advance).
7. The number of Common Shares of the Company outstanding as of the date hereof is
The undersigned has executed this Advance Notice as of the date first set forth above.
| SMX Public Limited Company | ||
| By: | ||
Please deliver this Advance Notice by email to:
Email: Trading@yorkvilleadvisors.com
Attention: Trading Department and Compliance Officer
Confirmation Telephone Number: (201) 985-8300.
EXHIBIT C
SETTLEMENT DOCUMENT
VIA EMAIL
SMX Public Limited Company
Attn:
Email:
| Below please find the settlement information with respect to the Advance Notice Date of: | ||||
| 1. | Number of Common Shares requested in the Advance Notice | |||
| 1.b. | Volume Threshold (Number of Common Shares in (1) divided by 0.30 | |||
| 1.c. | Number of Common Shares traded during Pricing Period | |||
| 2. | Minimum Acceptable Price for this Advance (if any) | |||
| 3. | Number of Excluded Days (if any) | |||
| 4. | Adjusted Advance Amount (if applicable) (including pursuant to Volume Threshold adjustment)) | |||
| 5. | Option [1] / [2] Market Price | |||
| 6. | Purchase Price (applicable Market Price x [97%/96%]) per share | |||
| 7. | Number of Advance Shares due to the Investor | |||
| 8. | Total Purchase Price due to Company (row 6 x row 7) | |||
If there were any Excluded Days then add the following
| 9. | Number of Additional Shares to be issued to the Investor | |||
| 10. | Additional amount to be paid to the Company by the Investor (Additional Shares in row 9 x Minimum Acceptable Price x 97%) | |||
| 11. | Total Amount to be paid to the Company (Purchase Price in row 8 + additional amount in row 10) | |||
| 12. | Total Advance Shares to be issued to the Investor (Advance Shares due to the Investor in row 7 + Additional Shares in row 9) | |||
Please issue the number of Advance Shares due to the Investor to the account of the Investor as follows:
INVESTOR’S DTC PARTICIPANT #:
ACCOUNT NAME:
ACCOUNT NUMBER:
ADDRESS:
CITY:
COUNTRY:
CONTACT PERSON:
NUMBER AND/OR EMAIL:
Sincerely,
YA II PN, LTD.
| Agreed and approved By SMX Public Limited Company: | ||
| Name: | ||
| Title: | ||
EXHIBIT D
PROMISSORY NOTE
EXHIBIT E
INVESTOR NOTICE,
CORRESPONDING ADVANCE NOTICE,
AND SETTLEMENT DOCUMENT
YA II PN, LTD.
| Dated: Investor | Notice Number: |
On behalf of YA II PN, LTD. (the “Investor”), the undersigned hereby certifies, with respect to the purchase of Common Shares of SMX Public Limited Company (the “Company”) issuable in connection with this Investor Notice, delivered pursuant to that certain Reciprocal Standby Equity Purchase Agreement, dated as of [ ], as amended and supplemented from time to time (the “Agreement”), as follows:
| 1. | Advance requested in the Advance Notice | |
| 2. | Purchase Price (equal to the Conversion Price as defined in the Promissory Note) | |
| 3. | Number of Shares due to Investor | |
The aggregate purchase price of the Shares to be paid by Investor pursuant to this Investor Notice and corresponding Advance Notice shall be offset against amounts outstanding under the Pre-Paid Advance evidenced by the Promissory Note dated [ ] (first towards accrued and unpaid interest, and then towards outstanding principal) as follows (and this information shall satisfy the obligations of the Investor to deliver a Settlement Document pursuant to the Agreement):
| 1. | Amount offset against accrued and unpaid Interest | $[ ] | ||
| 2. | Amount offset against Principal | $[ ] | ||
| 3. | Total amount of the Promissory Note outstanding following the Advance | $[ ] | ||
Please issue the number of Shares due to the Investor to the account of the Investor as follows:
INVESTOR’S DTC PARTICIPANT #:
ACCOUNT NAME:
ACCOUNT NUMBER:
ADDRESS:
CITY:
The undersigned has executed this Investor Notice as of the date first set forth above.
| YA II PN, LTD. | ||||
| By: | Yorkville Advisors Global, LP | |||
| Its: | Investment Manager | |||
| By: | Yorkville Advisors Global II, LLC | |||
| Its: | General Partner | |||
| By: | ||||
| Name: | ||||
Exhibit 4.28
Execution Version
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
CONVERTIBLE PROMISSORY NOTE
Original Principal Amount:$1,500,000
Issuance Date: March 9, 2023
Number: SMX-1
FOR VALUE RECEIVED, SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY, an public limited company organized under the laws of Ireland (the “Company”), hereby promises to pay to the order of YA II PN, LTD., or its registered assigns (the “Holder”), the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to repayment, redemption, conversion or otherwise, the “Principal”) and Payment Premium, in each case when due, and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate (as defined below) from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, whether upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof). Certain capitalized terms used herein are defined in Section (13). The Issuance Date is the date of the first issuance of this Convertible Promissory Note (the “Note”) regardless of the number of transfers and regardless of the number of instruments, which may be issued to evidence such Note. This Note was issued with an 8% original issue discount.
This Note is being issued pursuant to Section 3.01 of the Reciprocal Standby Equity Purchase Agreement, dated February 23, 2023 (as may be amended, amended and restated, extended, supplemented or otherwise modified in writing from time to time, the “SEPA”), between the Company and the Investor.
(1) GENERAL TERMS
(a) Maturity Date. On the Maturity Date, the Company shall pay to the Holder an amount in cash representing all outstanding Principal, plus the Payment Premium (if applicable), accrued and unpaid Interest, and any other amounts outstanding pursuant to the terms of this Note. The “Maturity Date” shall be March 9, 2024, as may be extended at the option of the Holder. Other than as specifically permitted by this Note, the Company may not prepay or redeem any portion of the outstanding Principal and accrued and unpaid Interest
(b) Interest Rate and Payment of Interest. Interest shall accrue on the outstanding Principal balance hereof at an annual rate equal to 0% (“Interest Rate”), which Interest Rate shall increase to an annual rate of 15% upon an Event of Default for so long as it remains uncured. Interest shall be calculated based on a 365-day year and the actual number of days elapsed, to the extent permitted by applicable law.
(c) Monthly Payments. If, any time after the Issuance Date set forth above, and from time to time thereafter, a Trigger Event occurs, then the Company shall make monthly payments beginning on the 10th Trading Days after the Trigger Date and continuing on the same day of each successive Calendar Month. Each monthly payment shall be in an amount equal to the sum of (i) $500,000 of Principal in the aggregate among this Note and all Other Notes (or the outstanding Principal if less than such amount) (the “Triggered Principal Amount”), plus (ii) the Payment Premium (as defined below) in respect of such Triggered Principal Amount, and (iii) accrued and unpaid interest hereunder as of each payment date. The obligation of the Company to make monthly prepayments hereunder shall cease (with respect to any payment that has not yet come due) if any time after the Trigger Date (A) the daily VWAP is greater than the 110% of the Floor Price a period of 5 consecutive Trading Days in the event of a Floor Price Trigger, or (B) the date the Company has obtained stockholder approval to increase the number of Common Stock under the Exchange Cap and/ or the Exchange Cap no longer applies, in the event of an Exchange Cap Trigger, unless a subsequent Trigger Event occurs.
(d) Optional Redemption. The Company at its option shall have the right, but not the obligation, to redeem (“Optional Redemption”) early a portion or all amounts outstanding under this Note as described in this Section; provided that (i) the trading price of the Common Stock is less than the Fixed Price and (ii) the Company provides the Holder with at least 5 Business Days’ prior written notice (each, a “Redemption Notice”) of its desire to exercise an Optional Redemption. 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 the Company, plus the Payment Premium, plus all accrued and unpaid interest. After receipt of the Redemption Notice, the Holder shall have 5 Business Days to elect to convert all or any portion of the Note. On the 6th Business Day after the Redemption Notice, the Company shall deliver to the Holder the Redemption Amount with respect to the Principal amount redeemed after giving effect to conversions effected during the 5 Business Day period.
(e) Payment Dates. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day.
(2) EVENTS OF DEFAULT.
(a) An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
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(i) the Company’s failure to pay to the Holder any amount of Principal, Payment Premium, Interest, or other amounts when and as due under this Note or any other Transaction Document within five (5) Business Days after such payment is due;
(ii) The Company or any Subsidiary of the Company shall commence, or there shall be commenced against the Company or any Subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any Subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any Subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of sixty one (61) days; or the Company or any Subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any Subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or all or substantially all of its property which continues undischarged or unstayed for a period of sixty one (61) days; or the Company or any Subsidiary of the Company makes a general assignment of all or substantially all of its assets for the benefit of creditors; or the Company or any Subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any Subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any Subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any Subsidiary of the Company for the purpose of effecting any of the foregoing;
(iii) The Company or any Subsidiary of the Company shall default in any of its obligations under any debenture, mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any Subsidiary of the Company in an amount exceeding $3,000,000, whether such indebtedness now exists or shall hereafter be created and such default is not cured within the time prescribed by the documents governing such indebtedness or if no time is prescribed within ten (10) Business Days (excluding, for the avoidance of doubt, payables to vendors in the ordinary course of business);
(iv) The Common Stock shall cease to be quoted or listed for trading, as applicable, on any Primary Market for a period of ten (10) consecutive Trading Days;
(v) The Company or any Subsidiary of the Company shall be a party to any Change of Control Transaction (as defined in Section (12)) unless in connection with such Change of Control Transaction this Note is retired;
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(vi) the Company’s (A) failure to deliver the required number of shares of Common Stock to the Holder within two (2) Trading Days after the applicable Share Delivery Date or (B) notice, written or oral, to any holder of the Note, including by way of public announcement, at any time, of its intention not to comply with a request for conversion of any Note into shares of Common Stock that is tendered in accordance with the provisions of the Note;
(vii) The Company shall fail for any reason to deliver the payment in cash pursuant to a Buy-In (as defined herein) within five (5) Business Days after such payment is due;
(viii) The Company’s failure to timely file with the Commission any Periodic Report on or before the due date of such filing as established by the Commission, it being understood, for the avoidance of doubt, that due date includes any permitted filing deadline extension under Rule 12b-25 under the Exchange Act;
(ix) Any material provision of any Transaction Document, at any time after its execution and delivery and for any reason other than as expressly permitted hereunder or thereunder, ceases to be in full force and effect; or the Company denies in writing that it has any or further liability or obligation under any Transaction Document, or purports in writing to revoke, terminate (other than in line with the relevant termination provisions) or rescind any Transaction Document;
(x) Any representation or warranty made or deemed to be made by the Company in any Transaction Document shall prove to have been incorrect in any material respect (or, in the case of any such representation or warranty already qualified by materiality, such representation or warranty shall prove to have been incorrect) when made or deemed made;
(xi) Any Event of Default (as defined in the Other Notes or in any Transaction Document other than this Note) occurs with respect to any Other Notes held by the Holder; or
(xii) The Company shall fail to observe or perform any material covenant, agreement or warranty contained in, or otherwise commit any material breach or default of any provision of this Note (except as may be covered by Section (2)(a)(i) through (2)(a)(xii) hereof) or any Transaction Document, which is not cured within the time prescribed or if no time is prescribed within ten (10) Business Days.
(b) During the time that any portion of this Note is outstanding, if any Event of Default has occurred (other than an event with respect to the Company described in Section (2)(a)(ii)), the full unpaid Principal amount of this Note, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder’s election given by notice pursuant to Section (5), immediately due and payable in cash; provided that, in the case of any event with respect to the Company described in Section (2)(a)(ii), the full unpaid Principal amount of this Note, together with interest and other amounts owing in respect thereof to the date of acceleration, shall automatically become due and payable, in each case without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company. Furthermore, in addition to any other remedies, the Holder shall have the right (but not the
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obligation) to convert, on one or more occasions all or part of the Note in accordance with Section (3) (and subject to the limitations set out in Section (3)(c)(i) and Section (3)(c)(ii)) at any time after (x) an Event of Default (provided that such Event of Default is continuing) or (y) the Maturity Date at the Conversion Price. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, (other than required notice of conversion) and the Holder may immediately enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by the Holder in writing at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.
(3) CONVERSION OF NOTE. This Note shall be convertible into shares of the Company’s Common Stock, on the terms and conditions set forth in this Section (3).
(a) Conversion Right. Subject to the limitations of Section (3)(c), at any time or times on or after the Issuance Date, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount into fully paid and nonassessable shares of Common Stock in accordance with Section (3)(b), at the Conversion Price. The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Section (3)(a) shall be determined by dividing (x) such Conversion Amount by (y) the Conversion Price. The Company shall not issue any fraction of a share of Common Stock upon any conversion. All calculations under this Section (3) shall be rounded to the nearest $0.0001. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer, stamp and similar taxes that may be payable with respect to the issuance and delivery of Common Stock upon conversion of any Conversion Amount.
(b) Mechanics of Conversion.
(i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by email (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”) to the Company and (B) if required by Section (3)(b)(iii), surrender this Note to a nationally recognized overnight delivery service for delivery to the Company (or an indemnification undertaking reasonably satisfactory to the Company with respect to this Note in the case of its loss, theft or destruction). On or before the third (3rd) Trading Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall (X) if legends are not required to be placed on certificates of Common Stock and provided that the Transfer Agent is participating in the Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (Y) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant to rules and regulations of the Commission. If this Note is physically surrendered for conversion and the outstanding Principal
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of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock upon the transmission of a Conversion Notice.
(ii) Company’s Failure to Timely Convert. If within three (3) Trading Days after the Company’s receipt of an email copy of a Conversion Notice the Company shall fail to issue and deliver a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder’s conversion of any Conversion Amount (a “Conversion Failure”), and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by the Holder of Common Stock issuable upon such conversion that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out of pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In Price”), at which point the Company’s obligation to deliver such certificate (and to issue such Common Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Common Stock and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Closing Price on the Conversion Date.
(iii) Book-Entry. Notwithstanding anything to the contrary set forth herein, upon conversion of any portion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Company unless (A) the full Conversion Amount represented by this Note is being converted or (B) the Holder has provided the Company with prior written notice (which notice may be included in a Conversion Notice) requesting reissuance of this Note upon physical surrender of this Note. The Holder and the Company shall maintain records showing the Principal and Interest converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Company, so as not to require physical surrender of this Note upon conversion.
(c) Limitations on Conversions.
(i) Beneficial Ownership. The Holder shall not have the right to convert any portion of this Note to the extent that after giving effect to such conversion, the Holder, together with any affiliate thereof, would beneficially own (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or receipt of shares as payment of interest. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof,
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the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the Principal amount of this Note is convertible shall be the responsibility and obligation of the Holder. The provisions of this Section may be waived by a Holder (but only as to itself and not to any other Holder) upon not less than 65 days prior notice to the Company. Other Holders shall be unaffected by any such waiver.
(ii) Principal Market Limitation. Notwithstanding anything in this Note to the contrary, the Company shall not issue any shares of Common Stock upon conversion of this Note, or otherwise, if the issuance of such Common Stock, together with any Common Stock issued in connection the SEPA and with any other related transactions that may be considered part of the same series of transactions, would exceed the aggregate number of shares of Common Stock that the Company may issue in a transaction in compliance with the Company’s obligations under the rules or regulations of Nasdaq Stock Market LLC (the “Nasdaq”) and shall be referred to as the “Exchange Cap,” except that such limitation shall not apply if the Company’s stockholders have approved such issuances on such terms in excess of the Exchange Cap in accordance with the rules of the Nasdaq.
(iii) Other Conversion Limitations. The Holder agrees that, except as set forth below, it shall not convert more than an aggregate of $500,000 of Conversion Amount of this Note and any Other Notes held by the Holder in any consecutive 30-day period. The limitations agreed by the Holder in this section shall not apply (i) at any time upon the occurrence and during the continuance of an Event of Default, and (ii) with respect to any conversions where the Conversion Price is greater than or equal to the Fixed Price. This limitation may be waived with the consent of the Company.
(d) Other Provisions.
(i) The execution, delivery and performance of this Note by the Company and the consummation by the Company of the transactions contemplated hereby (including, without limitation, the Payments hereunder) (i) will not result in a violation of the articles of incorporation or other organizational documents of the Company or its Subsidiaries, (ii) are not prevented or prohibited by or under any agreement, indenture or instrument to which the Company or its Subsidiaries is a party, (iii) will not conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or its Subsidiaries is a party, (iv) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or its Subsidiaries or by which any property or asset of the Company or its Subsidiaries is bound or affected except, in the case of clauses (ii), (iii) or (iv) above, to the extent such violations that would not reasonably be expected to have a Material Adverse Effect.
(ii) All calculations under this Section (4) shall be rounded to the nearest $0.0001 or whole share.
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(iii) (ii) The Company shall at all times reserve and keep available out of its authorized Common Stock the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note (the “Required Reserve Amount”), and within three (3) Business Days following the receipt by the Company of a Holder’s notice that such Required Reserve Amount is not so reserved or insufficient, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement. If at any time the number of authorized but unissued Common Stock is less than the Required Reserve Amount, the Company will promptly take all corporate action necessary to propose to its general meeting of shareholders an increase of its authorized share capital necessary to meet the Company’s obligations pursuant to this Note, recommending that shareholders vote in favor of such an increase. If at any time the number of shares of Common Stock that remain available for issuance under the Exchange Cap is less than 100% of the maximum number of shares issuable upon conversion of all the Notes and Other Notes then outstanding (assuming for purposes hereof that (x) the Notes are convertible at the Conversion Price then in effect, and (y) any such conversion shall not take into account any limitations on the conversion of the Note, other than the Floor Price), the Company will use commercially reasonable efforts to promptly call and hold a shareholder meeting for the purpose of seeking the approval of its shareholders as required by the applicable rules of the Principal Market, for issuances of shares in excess of the Exchange Cap. Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section (2) herein for the Company’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
(iv) Legal Opinions. The Company is obligated to cause its legal counsel to deliver legal opinions to the Company’s transfer agent in connection with any legend removal upon the expiration of any holding period or other requirement for which the Underlying Shares may bear legends restricting the transfer thereof. To the extent that are not provided (either timely or at all), then, in addition to being an Event of Default hereunder, the Company agrees to reimburse the Holder for all reasonable costs incurred by the Holder in connection with any legal opinions paid for by the Holder in connection with sale or transfer of Underlying Shares of Common Stock. The Holder shall notify the Company of any such costs and expenses it incurs that are referred to in this section from time to time and all amounts owed hereunder shall be paid by the Company with reasonable promptness.
(e) Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. If the Company, at any time while this Note is outstanding, shall (a) pay a stock dividend or otherwise make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock, (b) subdivide outstanding shares of Common Stock into a larger number of shares, (c) combine (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (d) issue by reclassification of shares of the Common Stock any shares of capital stock of the Company, then each of the Fixed Price and the Floor Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding before such event and of which the denominator shall be the number of shares of Common Stock outstanding after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.
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(f) Other Corporate Events. In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a “Corporate Event”), the Company shall make appropriate provision to ensure that the Holder will thereafter have the right to receive upon a conversion of this Note, at the Holder’s option, (i) in addition to the shares of Common Stock receivable upon such conversion, such securities or other assets to which the Holder would have been entitled with respect to such shares of Common Stock had such shares of Common Stock been held by the Holder upon the consummation of such Corporate Event (without taking into account any limitations or restrictions on the convertibility of this Note) or (ii) in lieu of the shares of Common Stock otherwise receivable upon such conversion, such securities or other assets received by the holders of shares of Common Stock in connection with the consummation of such Corporate Event in such amounts as the Holder would have been entitled to receive had this Note initially been issued with conversion rights for the form of such consideration (as opposed to shares of Common Stock) at a conversion rate for such consideration commensurate with the Conversion Price. Provision made pursuant to the preceding sentence shall be in a form and substance satisfactory to the Required Holders. The provisions of this Section shall apply similarly and equally to successive Corporate Events and shall be applied without regard to any limitations on the conversion or redemption of this Note.
(g) Other Corporate Events.
(h) Whenever the Conversion Price is adjusted pursuant to Section (3) hereof, the Company shall promptly provide the Holder with a written notice setting forth the Conversion Price after such adjustment and setting forth a brief statement of the facts requiring such adjustment.
(i) In case of any (1) merger or consolidation of the Company or any Subsidiary of the Company with or into another Person, or (2) sale by the Company or any Subsidiary of the Company of more than one-half of the assets of the Company in one or a series of related transactions, a Holder shall have the right to (A) exercise any rights under Section (2)(b), (B) convert the aggregate amount of this Note then outstanding into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such merger, consolidation or sale, and such Holder shall be entitled upon such event or series of related events to receive such amount of securities, cash and property as the shares of Common Stock into which such aggregate Principal amount of this Note could have been converted immediately prior to such merger, consolidation or sales would have been entitled, or (C) in the case of a merger or consolidation, require the surviving entity to issue to the Holder a convertible Note with a Principal amount equal to the aggregate Principal amount of this Note then held by such Holder, plus all accrued and unpaid interest and other amounts owing thereon, which such newly issued convertible Note shall have terms identical (including with respect to conversion) to the terms of this Note, and shall be entitled to all of the rights and privileges of the
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Holder of this Note set forth herein and the agreements pursuant to which this Note was issued. In the case of clause (C), the conversion price applicable for the newly issued shares of convertible preferred stock or convertible debentures shall be based upon the amount of securities, cash and property that each share of Common Stock would receive in such transaction and the Conversion Price in effect immediately prior to the effectiveness or closing date for such transaction. The terms of any such merger, sale or consolidation shall include such terms so as to continue to give the Holder the right to receive the securities, cash and property set forth in this Section upon any conversion or redemption following such event. This provision shall similarly apply to successive such events.
(4) REISSUANCE OF THIS NOTE.
(a) Transfer. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section (4)(d)), registered in the name of the registered transferee or assignee, representing the outstanding Principal being transferred by the Holder (along with any accrued and unpaid interest thereof) and, if less then the entire outstanding Principal is being transferred, a new Note (in accordance with Section (4)(d)) to the Holder representing the outstanding Principal not being transferred. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of Section (3)(b)(iii) following conversion or redemption of any portion of this Note, the outstanding Principal represented by this Note may be less than the Principal stated on the face of this Note.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note (in accordance with Section (4)(d)) representing the outstanding Principal.
(c) Note Exchangeable for Different Denominations. This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section (4)(d)) representing in the aggregate the outstanding Principal of this Note, and each such new Note will represent such portion of such outstanding Principal as is designated by the Holder at the time of such surrender.
(d) Issuance of New Notes. Whenever the Company is required to issue a new Note pursuant to the terms hereof, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the Principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 5(4)(a) or Section 5(4)(c), the Principal designated by the Holder which, when added to the Principal represented by the other new Note issued in connection with such issuance, does not exceed the Principal remaining outstanding under this Note immediately prior to such issuance of new Note), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest from the Issuance Date.
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(5) NOTICES. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing by letter and email and will be deemed to have been delivered: upon the later of (A) either (i) receipt, when delivered personally or (ii) one (1) Business Day after deposit with an overnight courier service with next day delivery specified, in each case, properly addressed to the party to receive the same and (B) receipt, when sent by electronic mail. The addresses and e -mail addresses for such communications shall be:
| If to the Company, to: | SMX (Security Matters) Public Limited Company | |
| Mespil Business Centre Mespil House Sussex Road Dublin 4 D04 T4A6 Email: haggai@securitymattersltd.com | ||
| with a copy (which shall not constitute notice) to: | Ruskin Moscou Faltischek, P.C. 1425 RXR Plaza East Tower, 15th Floor Uniondale, NY 11556 Attention: Stephen E. Fox, Esq. Email: SFox@rmfpc.com | |
| If to the Holder: | YA II PN, Ltd | |
| c/o Yorkville Advisors Global, LLC 1012 Springfield Avenue | ||
| Mountainside, NJ 07092 | ||
| Attention: Mark Angelo | ||
| Telephone: 201-985-8300 | ||
| Email: Legal@yorkvilleadvisors.com | ||
or at such other address and/or email and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) electronically generated by the sender’s email service provider containing the time, date, recipient email address or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
(1) Except as expressly provided herein, no provision of this Note shall alter or impair the obligations of the Company, which are absolute and unconditional, to pay the Principal of, interest and other charges (if any) on, this Note at the time, place, and rate, and in the currency, herein prescribed. This Note is a direct obligation of the Company. As long as this Note is outstanding, the Company shall not and shall cause their subsidiaries not to, enter into any agreement to adversely affect any rights of the Holder.
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(2) This Note shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.
(3) CHOICE OF LAW; VENUE; WAIVER OF JURY TRIAL
(a) Governing Law. This Note and the rights and obligations of the Parties hereunder shall, in all respects, be governed by, and construed in accordance with, the laws (excluding the principles of conflict of laws) of the State of New York (the “Governing Jurisdiction”) (including Section 5-1401 and Section 5-1402 of the General Obligations Law of the State of New York), including all matters of construction, validity and performance.
(b) Jurisdiction; Venue; Service.
(i) The Company hereby irrevocably consents to the non-exclusive personal jurisdiction of the state courts of the Governing Jurisdiction and, if a basis for federal jurisdiction exists, the non-exclusive personal jurisdiction of any United States District Court for the Governing Jurisdiction.
(ii) The Company agrees that venue shall be proper in any court of the Governing Jurisdiction selected by the Holder or, if a basis for federal jurisdiction exists, in any United States District Court in the Governing Jurisdiction. The Company waives any right to object to the maintenance of any suit, claim, action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, in any of the state or federal courts of the Governing Jurisdiction on the basis of improper venue or inconvenience of forum.
(iii) Any suit, claim, action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or tort or otherwise, brought by the Company against the Holder arising out of or based upon this Note or any matter relating to this Note, or any other Transaction Document, or any contemplated transaction, shall be brought in a court only in the Governing Jurisdiction. The Company shall not file any counterclaim against the Holder in any suit, claim, action, litigation or proceeding brought by the Holder against the Company in a jurisdiction outside of the Governing Jurisdiction unless under the rules of the court in which the Holder brought such suit, claim, action, litigation or proceeding the counterclaim is mandatory, and not permissive, and would be considered waived unless filed as a counterclaim in the suit, claim, action, litigation or proceeding instituted by the Holder against the Company. The Company agrees that any forum outside the Governing Jurisdiction is an inconvenient forum and that any suit, claim, action, litigation or proceeding brought by the Company against the Holder in any court outside the Governing Jurisdiction should be dismissed or transferred to a court located in the Governing Jurisdiction. Furthermore, the Company irrevocably and unconditionally agrees that it will not bring or commence any suit, claim, action, litigation or proceeding of any kind or
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description, whether in law or equity, whether in contract or in tort or otherwise, against the Holder arising out of or based upon this Note or any matter relating to this Note, or any other Transaction Document, or any contemplated transaction, in any forum other than the courts of the State of New York sitting in New York County, and the United States District Court of the Southern District of New York, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such suit, claim, action, litigation or proceeding may be heard and determined in such New York State Court or, to the fullest extent permitted by applicable law, in such federal court. The Company and the Holder agree that a final judgment in any such suit, claim, action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
(iv) The Company and the Holder irrevocably consent to the service of process out of any of the aforementioned courts in any such suit, claim, action, litigation or proceeding by the mailing of copies thereof by registered or certified mail postage prepaid, to it at the address provided for notices in this Note, such service to become effective thirty (30) days after the date of mailing.
(v) Nothing herein shall affect the right of the Holder to serve process in any other manner permitted by law or to commence legal proceedings or to otherwise proceed against the Company or any other Person in the Governing Jurisdiction or in any other jurisdiction.
(c) THE PARTIES MUTUALLY WAIVE ALL RIGHT TO TRIAL BY JURY OF ALL CLAIMS OF ANY KIND ARISING OUT OF OR BASED UPON THIS NOTE OR ANY MATTER RELATING TO THIS NOTE, OR ANY OTHER TRANSACTION DOCUMENT, OR ANY CONTEMPLATED TRANSACTION. THE PARTIES ACKNOWLEDGE THAT THIS IS A WAIVER OF A LEGAL RIGHT AND THAT THE PARTIES EACH MAKE THIS WAIVER VOLUNTARILY AND KNOWINGLY AFTER CONSULTATION WITH COUNSEL OF THEIR RESPECTIVE CHOICE. THE PARTIES AGREE THAT ALL SUCH CLAIMS SHALL BE TRIED BEFORE A JUDGE OF A COURT HAVING JURISDICTION, WITHOUT A JURY.
(4) If the Company fails to strictly comply with the terms of this Note, then the Company shall reimburse the Holder promptly for all fees, costs and expenses, including, without limitation, attorneys’ fees and expenses incurred by the Holder in any action in connection with this Note, including, without limitation, those incurred: (i) during any workout, attempted workout, and/or in connection with the rendering of legal advice as to the Holder’s rights, remedies and obligations, (ii) collecting any sums which become due to the Holder, (iii) defending or prosecuting any proceeding or any counterclaim to any proceeding or appeal; or (iv) the protection, preservation or enforcement of any rights or remedies of the Holder.
(5) Any waiver by the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing.
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(6) If any provision of this Note is invalid, illegal or unenforceable, the balance of this Note shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder shall violate applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the Principal of or interest on this Note as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impeded the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.
(7) CERTAIN DEFINITIONS. For purposes of this Note, the following terms shall have the following meanings:
(a) ”Bloomberg” means Bloomberg Financial Markets.
(b) “Business Day” means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions are authorized or required by law or other government action to close.
(c) ”Buy-In” shall have the meaning set forth in Section (3)(b)(ii).
(d) “Buy-In Price” shall have the meaning set forth in Section (3)(b)(ii).
(e) “Change of Control Transaction” means the occurrence of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of fifty percent (50%) of the voting power of the Company (except that the acquisition of voting securities by the Holder or any other current holder of convertible securities of the Company shall not constitute a Change of Control Transaction for purposes hereof), (b) a replacement at one time or over time of more than one-half of the members of the board of directors of the Company (other than as due to the death or disability of a member of the board of directors) which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), (c) the merger, consolidation or sale of fifty percent (50%) or more of the assets of the Company or any Subsidiary of the Company in one or a series of related transactions with or into another entity, or (d) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (a), (b) or (c). No transfer to a wholly-owned Subsidiary shall be deemed a Change of Control Transaction under this provision.
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(f) “Closing Price” means the price per share in the last reported trade of the Common Stock on a Primary Market or on the exchange which the Common Stock is then listed as quoted by Bloomberg.
(g) “Commission” means the U.S. Securities and Exchange Commission.
(h) “Conversion Amount” means the portion of the Principal, Interest, or other amounts outstanding under this Note to be converted, redeemed or otherwise with respect to which this determination is being made.
(i) ”Conversion Date” shall have the meaning set forth in Section (3)(b)(i).
(j) ”Conversion Failure” shall have the meaning set forth in Section (3)(b)(ii).
(k) ”Conversion Notice” shall have the meaning set forth in Section (3)(b)(i).
(l) ”Conversion Price” means, as of any Conversion Date or other date of determination the lower of (i) $3.65 per share of Common Stock (the “Fixed Price”), or (ii) 93% of the lowest daily VWAP during the 7 consecutive Trading Days immediately preceding the Conversion Date or other date of determination (the “Variable Price”), but not lower than the Floor Price. The Conversion Price shall be adjusted from time to time pursuant to the other terms and conditions of this Note.
(m) “Calendar Month” means one of the months as named in the calendar.
(n) “Common Stock” means the ordinary shares, par value $0.0001, of the Company and stock of any other class into which such shares may hereafter be changed or reclassified.
(o) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(p) “Floor Price” means the lower of (i) $0.50 per share, or 20% of the VWAP on the Trading Day immediately prior to the effectiveness of the initial Underlying Shares Registration Statement.
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(q) “Fundamental Transaction” means any of the following: (1) the Company effects any merger or consolidation of the Company with or into another Person and the Company is the non-surviving company (other than a merger or consolidation with a wholly owned Subsidiary of the Company for the purpose of redomiciling the Company), (2) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (3) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (4) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property.
(r) “Other Notes” means any other notes issued pursuant to the SEPA and any other debentures, notes, or other instruments issued in exchange, replacement, or modification of the foregoing.
(s) “Payment Premium” means 7% of the Principal amount being paid.
(t) “Periodic Reports” shall mean the Company’s (i) Annual Report on Form 20-F for the fiscal year ending December 31, 2022, and (ii) all other reports required to be filed by the Company with the Commission under applicable laws and regulations (including, without limitation, Regulation S-K) for so long as any amounts are outstanding under this Note or any Other Note; provided that all such Periodic Reports shall include, when filed, all information, financial statements, audit reports (when applicable) and other information required to be included in such Periodic Reports in compliance with all applicable laws and regulations.
(u) “Person” means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency.
(v) “Primary Market” shall mean the Nasdaq Stock Market; provided however, that in the event the share of Common Stock are ever listed or traded on the New York Stock Exchange, or the NYSE American, then the “Principal Market” shall mean such other market or exchange on which the shares of Common Stock are then listed or traded to the extent such other market or exchange is the principal trading market or exchange for the Common Stock.
(w) “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
(x) ”Share Delivery Date” shall have the meaning set forth in Section (3)(b)(i).
(y) “Subsidiary” means, with respect to any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of capital stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, general partners or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person; (ii) such Person and one or more Subsidiaries of such Person; or (iii) one or more Subsidiaries of such Person.
(z) “Trading Day” means a day on which the shares of Common Stock are quoted or traded on a Primary Market on which the shares of Common Stock are then quoted or listed; provided, that in the event that the shares of Common Stock are not listed or quoted, then Trading Day shall mean a Business Day.
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(aa) “Transaction Document” means, each of, the Other Notes, the SEPA, the Registration Rights Agreement and any and all documents, agreements, instruments or other items executed or delivered in connection with any of the foregoing.
(bb) “Trigger Event” shall mean (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) the Company has issued in excess of 95% of the Common Stock available under the Exchange Cap (an “Exchange Cap Trigger”) (the last such day of each such occurrence, a “Trigger Date”).
(cc) “Triggered Principal Amount” shall have the meaning set forth in Section (1)(c).
(dd) “Underlying Shares” means the shares of Common Stock issuable upon conversion of this Note or as payment of interest in accordance with the terms hereof.
(ee) “Underlying Shares Registration Statement” means a registration statement meeting the requirements set forth in the Registration Rights Agreement, covering among other things the resale of the Underlying Shares and naming the Holder as a “selling stockholder” thereunder.
(ff) ”VWAP” means, for any security as of any date, the daily dollar volume-weighted average price for such security on the Primary Market during regular trading hours as reported by Bloomberg through its “Historical Prices – Px Table with Average Daily Volume” functions.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Convertible Promissory Note to be duly executed by a duly authorized officer as of the date set forth above.
| COMPANY: | ||
| SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY | ||
| By: |
/s/ Haggai Alon | |
| Name: |
Haggai Alon | |
| Title: |
CFO | |
EXHIBIT I
CONVERSION NOTICE
(To be executed by the Holder in order to Convert the Note)
TO: SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY
Via Email:
The undersigned hereby irrevocably elects to convert a portion of the outstanding and unpaid Conversion Amount of the Convertible Promissory Note issued on March 8, 2023 (No. SMX-1) into Shares of Common Stock of SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY, according to the conditions stated therein, as of the Conversion Date written below.
| Conversion Date: |
| Principal Amount to be Converted: |
| Accrued Interest to be Converted: |
| Total Conversion Amount to be converted: |
| Fixed Price: |
| Variable Price: |
| Applicable Conversion Price: |
| Number of shares of Common Stock to be issued: |
| Please issue the shares of Common Stock in the following name and deliver them to the following account: |
| Issue to: |
| Broker DTC Participant Code: |
| Account Number: |
| Authorized Signature: | ||
| Name: | ||
| Title: | ||
Exhibit 4.29
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.
Security Matters Limited
Senior Secured Promissory Note
due [ ]
| Dated: [ ] | Up to ILS [ ] |
For value received, Security Matters Limited, an Australian company number 626 192 998 (the “Maker” or “Company”), hereby promises to pay to the order of [_____] (together with its successors and assigns, the “Holder” or “Purchaser”), in accordance with the terms hereinafter provided, the principal amount of ILS[___], or so much thereof as may be advanced to the Maker and outstanding hereunder; provided that, for the avoidance of doubt, in no event shall the Maker be obligated to pay to the Holder more than the outstanding principal balance of funds advanced to the Maker, together with the unpaid interest accrued in respect thereof.
All payments under or pursuant to this Senior Secured Promissory Note (this “Note”) shall be made in United States Dollars in immediately available funds to the Holder at the address the Holder may designate from time to time in writing to the Maker or by wire transfer of funds to the Holder’s account, instructions for which are attached hereto as Exhibit A. The outstanding principal balance of this Note shall be due and payable on [_____] (the “Maturity Date”), or at such earlier time as provided herein.
ARTICLE I
1.1 Definitions. As used in this Senior Secured Promissory Note, the following terms shall have the respective definitions set forth in this Section 1.1.
“Business Combination” is defined in Section 0.
“Business Day” shall mean any day other than a Saturday, Sunday or a public holiday under the laws of the State of New York.
“Change in Control” is defined in Section 0.
“Collateral” shall mean [_____] shares of True Gold Consortium PTY Ltd. ACN 641 483 374, as more particularly reflected in Schedule 1 of the Share Pledge.
“Events of Default” is defined in Section 2.1.
“Exchange Act” shall mean the Securities Exchange Act of 1934.
“Holder” is defined in the Preamble.
“IFRS” means the International Financial Reporting Standards as promulgated as of the applicable date by the International Accounting Standards Board.
“Maker” is defined in the Preamble.
“Maturity Date” is defined in the Preamble.
“Note” is defined in the Preamble.
“Ordinary Shares” means the ordinary shares of the Company, with a nominal value of [US$0.0001] per share, and any securities into which such ordinary shares may hereafter be reclassified.
“Purchaser” is defined in the Preamble.
“Restricted Payments” is defined in Section 3.1(b).
“Senior Notes” is defined in Section 1.10.
“Share Pledge” means that certain Share Pledge dated as of even date herewith, between Maker and Holder granting a security interest in the Collateral.
1.2 Advances of Principal. Holder shall advance the principal amount of this Note as follows: ILS[___] simultaneous with the execution of this Note
1.3 Interest. 10% per annum, payable quarterly in arrears, [which may, at the option of the Holder, be waived in lieu of additional Bonus Warrants at a price of $0.10 per Bonus Warrant].
1.4 Payment of Principal. All outstanding principal under this Note shall be repaid on the earlier of:
(a) (i) 50% of the principal of, and accrued and unpaid interest on, the Note shall be due and payable [_____]; and
(b) a Change in Control.
For purposes hereof, “Business Combination” means a merger with Empatan PLC, an Irish public limited company.
A “Change in Control” will be deemed to exist if (i) there occurs any consolidation, merger or other business combination of the Company, other than the Business Combination, with or into any other corporation or other entity or person (whether or not the Company is the surviving corporation), or any other corporate reorganization or transaction or series of related transactions in which in any of such events the voting stockholders of the Company prior to such event cease to own 50% or more of the voting power, or corresponding voting equity interests, of the surviving corporation after such event (including without limitation any “going private” transaction under Rule 13e-3 promulgated pursuant to the Exchange Act or tender offer by the Company under Rule 13e-4 promulgated pursuant to the Exchange Act for 50% or more of the Maker’s Ordinary Shares), (ii) any person (as defined in Section 13(d), or similar securities laws of the applicable jurisdictions, of the Securities Exchange Act of 1934, as amended), together with its affiliates and associates (as such terms are defined in Rule 405
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under the Act), beneficially owns or is deemed to beneficially own (as described in Rule 13d-3 under the Exchange Act without regard to the 60-day exercise period) in excess of 50% of the Company’s voting power, (iii) there is a replacement of more than one-half of the members of the Company’s Board of Directors which is not approved by those individuals who are members of the Company’s Board of Directors immediately prior to such replacement, (iv) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the assets of the Company, determined on a consolidated basis.
In the event that the principal or any part thereof is not repaid together with the interest due on the due date for payment as set out above, the Holder shall, without notice or demand, be entitled to exercise its rights under and in accordance with this Note.
1.5 Payment on Non-Business Days. Whenever any payment to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of New York, such payment may be due on the next succeeding Business Day and such next succeeding Business Day shall be included in the calculation of the amount of accrued interest payable on such date.
1.6 Manner of Payment. Payments in respect of this Note shall be made by wire transfer of immediately available funds to the account designated by Holder from time to time.
1.7 Transfer. This Note may not be transferred or sold.
1.8 Replacement. Upon receipt of a duly executed, notarized and unsecured written statement from the Holder with respect to the loss, theft or destruction of this Note (or any replacement hereof) and a standard indemnity, or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Maker shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note.
1.9 Use of Proceeds. The Maker shall use the proceeds of this Note for working capital and other business purposes in connection with its business.
1.10 Senior Status of Note. Except as provided in the next sentence, the obligations of the Maker under the Note shall be senior to all other existing indebtedness and equity of the Maker. The Note shall be pari passu with up to USD 5 million aggregate principal amount of 10% Secured Notes due 2023 of the Company (with the Note, the “Senior Notes”). Upon any Event of Default, the Holder will be entitled to receive, before any distribution or payment is made upon, or set apart with respect to, any indebtedness of the Maker junior to the Senior Notes or any class of capital stock of the Maker, an amount equal to the principal amount plus all accrued and unpaid interest thereon and any and all other amounts due hereunder.
1.11 Secured Note. The full amount of this Note is secured by a first priority pledge on the Collateral. Except as described in Section 1.10 hereof, Maker hereby represents and warrants that the Collateral is free and clear from any other pledge or other encumbrance, other than the obligations described in the Constitution of True Gold Consortium PTY Ltd. and will remain so for so long as they are pledged to Holder.
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ARTICLE 2
2.1 Events of Default. The occurrence of any of the following events shall be an “Event of Default” under this Note: any default in the payment of (1) the principal amount hereunder when due and payable; or (2) interest on this Note, as and when the same shall become due and payable; Maker’s dissolution or termination of existence, or discontinuance of a material portion of such entity’s business operations; the appointment of a receiver for any material part or all of the property of such entity; an assignment for the benefit of creditors by Maker; the commencement of any proceeding under any bankruptcy or insolvency laws by or against Maker, which results in the entry of an order for relief or which remains undismissed, undischarged or unbonded for a period of 60 days or more; a default under the Share Pledge that remains unsecured beyond any applicable cure periods thereon; a default under the Distribution Agreement that remains unsecured beyond any applicable cure periods thereon; incurrence of any indebtedness that is senior in preference to the Note or incurrence of pari passu indebtedness in excess of the Senior Notes; breach of any covenants hereof; breach of any other indebtedness pari passu to the Note or exercise of any rights under any share pledge, deed, share mortgage or other similar instrument granting a security interest in the Collateral; false or misleading representations, warranties, or certifications; final judgments in excess of USD 1,000,000 not discharged or stayed after applicable periods.
2.2 Remedies Upon An Event of Default. Upon the occurrence of any Event of Default, the Maker shall, as promptly as possible but in any event within three (3) Business Days of the occurrence of such Event of Default, notify the Holder of the occurrence of such Event of Default, describing the event or factual situation giving rise to the Event of Default and specifying the relevant subsection or subsections of Section 2.1 hereof under which such Event of Default has occurred. If an Event of Default shall have occurred and shall be continuing, the Holder of this Note may at any time declare the entire unpaid principal balance of this Note, together with all interest accrued hereon, due and payable, and thereupon, the same shall be accelerated and so due and payable, without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by the Maker. No course of delay on the part of the Holder shall operate as a waiver thereof or otherwise prejudice the rights of the Holder. No remedy conferred hereby shall be exclusive of any other remedy referred to herein or now or hereafter available at law, in equity, by statute, in the Share Pledge, or otherwise.
ARTICLE 3
3.1 Covenants. For so long as this Note is outstanding:
(a) Sale of Collateral; Liens. From the date hereof until the full release of the security interest in the Collateral, (i) the Maker shall not sell, lease, transfer or otherwise dispose of any of the Collateral; and (ii) (A) the Maker shall not, directly or indirectly, create, permit or suffer to exist any lien, security interest or other encumbrance on the Collateral, except as otherwise described in this Note and (B) the Maker shall defend the Collateral against and take such other action as is necessary to remove, any lien, security interest or other encumbrance on the Collateral.
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(b) Restricted Payments. The Maker shall not declare or pay any dividend on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any capital stock or equivalent interest (or any right or option to purchase any of the foregoing), whether in cash or property or obligations of the Maker (collectively, “Restricted Payments”).
(c) Notice of Negotiations. Subject to applicable law, rules, and regulations, the Maker shall give the Holder prompt written notice upon entering into any negotiations related to a transaction that is reasonably likely to result in a Change of Control. Without limiting the generality of the foregoing, the Maker shall give the Holder written notice of its intent to enter into an agreement that would result in a Change of Control no later than ten days prior to the execution of any such agreement.
(d) Notice of Business Combination. The Maker shall give the Holder written notice of the Business Combination within three (3) Business Days of the closing thereof.
ARTICLE 4
4.1 Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective upon hand delivery, by telecopy, facsimile or electronic transmission to the address(es) or number set forth below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received), or by electronic transmission when sent by sender or on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.
If to Maker:
Afik & Co.
103 Hahashmonaim Street
Tel Aviv, Israel
Attention: Doron Afik
Email: doron@afiklaw.com
If to Holder:
[_____]
4.2 Governing Law. This Note shall be governed by and construed in accordance with the internal laws of the State of Delaware, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Note shall not be interpreted or construed with any presumption against the party causing this Note to be drafted.
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4.3 Headings. Article and section headings in this Note are included herein for purposes of convenience of reference only and shall not constitute a part of this Note for any other purpose.
4.4 Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including, without limitation, a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit Holder’s right to pursue actual damages for any failure by the Maker to comply with the terms of this Note. Amounts set forth or provided for herein with respect to payments and the like (and the computation thereof) shall be the amounts to be received by the Holder and shall not, except as expressly provided herein, be subject to any other obligation of the Maker (or the performance thereof). The Maker acknowledges that a breach by it of its obligations hereunder will cause irreparable and material harm to the Holder and that the remedy at law for any such breach would be inadequate. Therefore, the Maker agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available rights and remedies, at law or in equity, to equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the necessity of showing economic loss and without any bond or other security being required.
4.5 Enforcement Expenses. The Maker agrees to pay all costs and expenses of enforcement of this Note and all costs and expenses incurred during any workout, restructuring or negotiations in respect of this Note, including, without limitation, reasonable attorneys’ fees and expenses.
4.6 Binding Effect. The obligations of the Maker and the Holder set forth herein shall be binding upon the successors and assigns of each such party, whether or not such successors or assigns are permitted by the terms herein.
4.7 Amendments. No provision of this Note may be modified or amended other than by a written instrument signed by the Maker and the Holder.
4.8 Compliance with Securities Laws. The Holder of this Note acknowledges that this Note is being acquired solely for the Holder’s own account and not as a nominee for any other party, and for investment, and that the Holder shall not offer, sell or otherwise dispose of this Note in violation of securities laws (it being understood and agreed that Holder shall be permitted to transfer this Note to any affiliate thereof in its sole discretion). This Note and any Note issued in substitution or replacement therefor shall be stamped or imprinted with a legend in substantially the following form:
“THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND SUCH STATE SECURITIES LAWS.”
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4.9 Successors and Assigns. The provisions of this Note shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that (i) the Maker may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of Holder (and any attempted assignment or transfer by the Maker without such consent shall be null and void) and (ii) the Holder may not assign or otherwise transfer its rights or obligations hereunder without the prior written consent of the Maker (and any attempted assignment or transfer by the Holder without such consent shall be null and void); provided that the Holder may assign or otherwise transfer its rights or obligations hereunder in its sole discretion without the prior written consent of the Maker in the case of any assignment or transfer to an affiliate of the Holder.
4.10 Consent to Jurisdiction. Each of the Maker and the Holder (i) hereby irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in Harris County, Texas and the courts of Harris County, Texas for the purposes of any suit, action or proceeding arising out of or relating to this Note and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper. Each of the Maker and the Holder consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing in this Section 4.10 shall affect or limit any right to serve process in any other manner permitted by law. Each of the Maker and the Holder hereby agree that the prevailing party in any suit, action or proceeding arising out of or relating to this Note shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party.
4.11 Parties in Interest. This Note shall be binding upon, inure to the benefit of and be enforceable by the Maker, the Holder and their respective successors and permitted assigns.
4.12 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.
4.13 Maker Waivers, Dispute Resolution. Except as otherwise specifically provided herein, the Maker and all others that may become liable for all or any part of the obligations evidenced by this Note, hereby waive presentment, demand, notice of nonpayment, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, and do hereby consent to any number of renewals of extensions of the time or payment hereof and agree that any such renewals or extensions may be made without notice to any such persons and without affecting their liability herein and do further consent to the release of any person liable hereon, all without affecting the liability of the other persons, firms or Maker liable for the payment of this Note, AND DO HEREBY WAIVE TRIAL BY JURY.
(a) No delay or omission on the part of the Holder in exercising its rights under this Note, or course of conduct relating hereto, shall operate as a waiver of such rights or any other right of the Holder, nor shall any waiver by the Holder of any such right or rights on any one occasion be deemed a waiver of the same right or rights on any future occasion.
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(b) THE MAKER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS NOTE IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED BY APPLICABLE LAW, HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH THE HOLDER OR ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
4.14 Most Favored Nations Treatment. If the Company enters into a subsequent financing (other than standard commercial credit arrangements) with any third party on terms that are more favorable to such third party than the terms of this Note and the warrant issued in connection herewith, this Note and such warrant may together be exchanged, for no additional consideration, for securities in such subsequent financing issuable upon an investment of the then outstanding principal amount of this Note.
[Signature Pages Follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Note to be duly executed by their respective authorized officers as of the date first above written.
| Security Matters Limited | ||
| By: | ||
| Name: | Haggai Alon | |
| Title: | CEO | |
| [_____] | ||
| By: | ||
| Name: | ||
| Title: | ||
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Exhibit 4.30
Specific Security Deed—Shares
Security Matters Limited
ACN 626 192 998
and
[_____]
Date: [ ]
Specific Security Deed – Shares
Date [___]
Parties
| 1. | Security Matters Limited ACN 626 192 998 of Level 25, 525 Collins Street, Melbourne, Victoria 3000, Australia (Grantor). |
| 2. | [_____] |
Background
The Grantor has or will have sufficient right, interest or power to grant a security interest in the Collateral. The Grantor has agreed to grant a security interest in the Collateral to secure the payment or repayment of the Secured Moneys and the observance and performance of its respective obligations under the Transaction Documents.
Agreed terms
This Deed witnesses that, in consideration of among other things, the mutual promises contained in this Deed, the parties agree as follows:
| 1. | Definitions and interpretation |
| 1.1 | Incorporated definitions from the Principal Agreement |
Words and expressions defined in the Principal Agreement (including by reference or incorporation) have the same meanings when used in this Deed, unless they are expressly defined in this Deed in which case the meaning in this Deed applies.
| 1.2 | Definitions |
In this Deed:
Account Bank means, in respect of the Proceeds Account, the authorised deposit-taking institution at which that Proceeds Account is opened;
Attorney means an attorney appointed under this Deed;
Authorised Representative means in respect of the Secured Party, a director or secretary of the Secured Party, or any employee or officer of the Secured Party whose title or acting title includes the word “director”, “chief”, “counsel”, “executive”, “head”, “president” or “manager” or a person notified to the Grantor as being its attorney or authorised representative for the purposes of the Transaction Documents;
Certificate means any original, duplicate or counterpart certificate or other document of title or evidencing title to any Securities, including any certificate of units in a unit trust, share certificate or certificate evidencing an Investment Instrument;
Collateral means all of the Grantor’s present and future right, title and interest in: (a) the Shares; (b) the New Rights; (c) a Proceeds Account and all things in action in respect of that Proceeds Account; and (d) the proceeds of any of the things referred to in any paragraph above;
Collateral Security means any present or future Security Interest, Guarantee or other document or agreement created or entered into by the Grantor or any other person as security (directly or indirectly) for the payment or repayment of any Secured Moneys or the performance of any obligations under the Transaction Documents (but does not include the Security);
Controller has the meaning given in the Corporations Act;
Deed means this Deed including any Schedules;
Default or Event of Default means an event of default (however described) under, or as defined in, any Transaction Document;
Distribution means any money owing now or in the future in respect of any Securities and includes a cash dividend or other monetary distribution, whether of an income or capital nature;
External Administrator means an administrator, Controller, trustee, provisional liquidator, liquidator and receiver or any other person (however described) holding or appointed to an analogous office or acting or purporting to act in an analogous capacity;
Guarantee means a guarantee, indemnity, letter of credit, performance bond, binding letter of comfort, or other undertaking or obligation (whether conditional or unconditional) to: (a) do any one or more of the following in respect of an obligation of another person (whether or not it involves the payment of money): (i) provide funds (including by the purchase of property), or otherwise to make property available, in or towards payment or discharge of that obligation; (ii) indemnify against the consequences of default in the payment or performance of that obligation; or (b) be responsible in any other way for that obligation; or (c) be responsible for the solvency or financial condition of another person;
Issuer means True Gold Consortium Pty Ltd ACN 641 483 374 of 51B Marlow Street, Wembley, Western Australia 6014;
Liquidation means: (a) a winding up, dissolution, liquidation, provisional liquidation, administration, bankruptcy or other proceeding for which an External Administrator is appointed, or an analogous or equivalent event or proceeding in any jurisdiction; or (b) an arrangement, moratorium, assignment or composition with or for the benefit of creditors or any class or group of them;
Marketable Security means: (a) a marketable security as defined in section 9 of the Corporations Act; (b) a unit (whatever called) or other interest in a trust, estate or partnership; (c) a convertible note or bond; (d) right or option in respect of anything specified in paragraphs (a), (b) or (c) above; or (e) any instrument or security that is a combination of any of the above;
New Rights means all of the Grantor’s rights and property attaching to or arising out of or otherwise in respect of the holding of any Shares, including: (a) any Distributions paid or payable to or for the account of the Grantor; (b) any allotments, offers, benefits, privileges, rights, bonuses, stock, debentures or other Marketable Securities or rights to take up Marketable Securities (c) the Grantor’s rights as a result of any conversion, redemption, cancellation, reclassification, forfeiture, consolidation or subdivision; (d) the Grantor’s rights in any in specie distribution; and (e) the Grantor’s rights as a result of a reduction of capital or a Liquidation, and all of the Grantor’s rights and property attaching to or arising out of or otherwise in respect of the holding of any of the rights and property interests specified in any paragraph above;
Power means any right, power, authority, discretion or remedy conferred on the Secured Party, a Receiver or an Attorney by this Deed or any applicable law;
PPSA means the Personal Property Securities Act 2009 (Cth);
Principal Agreement means the Senior Secured Promissory Note issued by Grantor in favour of Secured Party dated as of even date herewith due December 28, 2023;
Priority Deed means any deed in form and substance satisfactory to the Secured Party which regulates the priority of the Security and any other Security Interest;
Receiver means a receiver or receiver and manager appointed under the Security;
Shares means the Marketable Securities described in Schedule 1;
Secured Moneys means all debts and monetary liabilities of the Grantor to the Secured Party under or in relation to the Transaction Documents and in any capacity, irrespective of whether the debts or liabilities: (a) are present or future; (b) are actual, prospective, contingent or otherwise; (c) are at any time ascertained or unascertained; (d) are owed or incurred by or on account of a Grantor or severally or jointly with any other person and whether as principal or surety; (e) are owed to or incurred for the account of the Secured Party alone or severally or jointly with any other person and whether as principal or surety; (f) are owed to any other person as agent (whether disclosed or not) for or on behalf of the Secured Party; (g) are owed or incurred as principal, interest, fees, charges, Tax, damages (whether for breach of contract or tort or incurred on any other ground and whether liquidated or unliquidated), losses, costs or expenses, or on any other account; (h) are owed to or incurred for the account of the Secured Party directly or as a result of the assignment or transfer to the Secured Party of any debt or liability of a Grantor or any other dealing with any such debt or liability; (i) are owed to or incurred for the account of the Secured Party before the date of this Deed or before the date of any assignment or novation of this Deed to the Secured Party by any other person or otherwise; or (j) comprise any combination of the above
Securities means the Shares and the New Rights;
Security means the security created or expressed to be created by the Grantor by this Deed;
Security Interest means any: (a) PPSA Security Interest; (b) security for payment of money, performance of obligations or protection against default (including a mortgage, bill of sale, charge, lien, pledge, trust, power or title retention arrangement, right of set-off, assignment of income, garnishee order or monetary claim and flawed deposit arrangements); and (c) thing or preferential interest or arrangement of any kind giving a person priority or preference over claims of other persons or creditors with respect to any property or asset, and includes any agreement to create any of them or allow them to exist;
Transaction Document means: (a) this Deed; (b) Principal Agreement; (c) a Collateral Security; (d) a Priority Deed; (e) any document or agreement that the Grantor and the Secured Party agree is a ‘Transaction Document’ for the purposes of this Deed; and (d) any document or agreement entered into or given under or in connection with, or for the purpose of amending or novating, any document or agreement referred to in any paragraph above; and
Transfer means, in respect of any Securities held by a Grantor, any transfer of those Securities which is sufficient to transfer all the Grantor’s ownership in the Securities to the Secured Party or as it directs, which leaves the name of the transferee, the consideration and the date of transfer and execution blank and which is duly executed by or on behalf of the Grantor as transferor.
| 1.3 | PPSA defined terms |
In this Deed, the following words and expressions have the same meanings given to them in the PPSA: Amendment Demand, Investment Instrument, Registration and Verification Statement.
| 1.4 | Interpretation |
(a) In this Deed, unless the context requires otherwise: (i) the singular includes the plural and vice versa; (ii) a gender includes the other genders; (iii) other grammatical forms of a defined word or expression have a corresponding meaning; (iv) a reference to a Transaction Document or to any other document or agreement is to that Transaction Document or other document or agreement as amended, novated, supplemented, extended or restated from time to time; (v) a reference to a party to this Deed includes that party’s executors, administrators, successors, permitted assigns and permitted substitutes; (vi) a reference to a person or an entity includes a natural person, partnership, body corporate, association, joint venture, governmental or local authority (whether or not having a separate legal personality) and any other body or entity (whether incorporated or not); (vii) a reference to a thing (including a right) includes a part of it but nothing in this clause 1.4 implies that part performance of an obligation constitutes performance of that obligation; (viii) a reference to a document includes any agreement or contract evidenced by writing and any certificate, notice, deed, instrument or other document of any kind; (ix) a reference to an agreement includes an undertaking, deed, agreement or legally enforceable arrangement or understanding whether or not in writing; (x) a reference to all or any part of a statute, rule, regulation ordinance or by-law is to that statute, rule, regulation, ordinance or by-law as amended, consolidated, re-enacted or replaced from time to time and a reference to a statute includes all rules, regulations, ordinances and by-laws issued under that statute; (xi) a reference to a clause, party, annexure, exhibit or schedule is a reference to a clause of, or a party, an annexure, an exhibit or a schedule to, this Deed and a reference to this Deed includes any annexure, exhibit and schedule to this Deed; (xii) money amounts are stated in Australian currency; and (xiii) a reference to a time of day is to that time in Victoria. (b) In this Deed, headings are used for convenience only and do not affect the interpretation of this Deed. (c) When used in this Deed, “include”, “for example” or any similar expression is not used, and must not be interpreted, as words of limitation. (d) In this Deed, a reference to any agency or body that ceases to exist, or is reconstituted, renamed or replaced, or has its powers or functions removed is to the agency or body that replaces it or which substantially succeeds to and performs most closely those powers or functions. (e) Any provision in this Deed which is in favour of more than one person benefits all of them jointly and each of them severally unless a contrary intention is expressed. (f) Any provision in this Deed which binds more than one person binds all of them jointly and each of them severally unless a contrary intention is expressed. (g) No provision of this Deed may be construed adversely to a party solely because that party was responsible for the preparation of this Deed or the preparation or proposal of that provision. (h) In this Deed, a reference to “property” or “assets” includes present and future property or assets of any nature, including a business, and all rights, revenues and benefits. (i) In this Deed, a reference to “control” includes control as defined in the PPSA and a reference to “possession” includes possession as defined in the PPSA. (j) An Event of Default is “subsisting” or “subsists” if it has not been remedied to the satisfaction of the Secured Party or has not been waived in writing by the Secured Party.
| 1.5 | Business Days |
Where the day on which any thing is to be done under this Deed is a day that is not a Business Day, that thing must be done on or by the next Business Day.
| 2. | Covenant to pay |
The Grantor must pay or repay the Secured Moneys and all other amounts due and payable under this Deed when they become due and payable in accordance with the terms of the Transaction Documents and each other obligation under which the Secured Moneys are payable.
| 3. | Grant of Security |
The Grantor grants a security interest in the Collateral to the Secured Party to secure the payment or repayment of the Secured Moneys and the observance and performance by the Grantor of all of its respective obligations under the Transaction Documents. The security interest is a charge.
The parties intend that the Security will take priority over all other interests in the Collateral other than any Security Interest mandatorily preferred by law.
| 3.1 | PPSA Security Interests |
(a) The Secured Party has not agreed to subordinate any PPSA Security Interest in the Collateral to any other interest in the Collateral at any time. (b) Nothing in this Deed constitutes an agreement that any PPSA Security Interest granted by this Deed attaches later than the time provided under section 19(2) of the PPSA.
| 3.2 | Consideration |
The Grantor enters into this Deed in consideration of, among other things, the Secured Party and the Secured Party entering into the Transaction Documents or providing or continuing to provide financial accommodation from time to time or agreeing to do so (whether or not subject to conditions).
| 3.3 | Required action |
To the extent that any law requires that action be taken (such as obtaining consent) before the relevant Grantor can validly grant the Security over any of the Collateral, the Security only takes effect in relation to that Collateral when the required action is taken. Each Grantor agrees to do everything necessary to ensure that the required action is taken.
| 4. | Discharge of Security |
| 4.1 | Discharge |
Subject to clause 4.2, the Secured Party must, at the request and cost of the Grantor, discharge the Security if: (a) the Secured Moneys have been unconditionally and irrevocably paid or repaid in full; and (b) the Grantor has fully observed and performed their respective obligations under each Transaction Document.
| 4.2 | Final discharge |
(a) The Secured Party is not obliged to discharge the Security under clause 4.1 if, at the time the requirements of that clause are satisfied, the Secured Party is of the reasonable opinion that: (i) the Grantor owes further Secured Moneys contingently or otherwise to the Secured Party; or (ii) the Grantor will owe further Secured Moneys to the Secured Party within a reasonable time after the date a Grantor requests the discharge of the Security. (b) Clause 4.2(a) overrides any other clause in this Deed to the contrary. (c) The parties intend that clause 4.2(a)(ii) will be severed from clause 4.2(a) if clause 4.2(a)(ii) is void or unenforceable under any applicable law. (d) The parties do not intend clause 4.2(c) to exclude the general law of severance from applying to this Deed. Any discharge under this clause 4 is subject to reinstatement under clause 16.10.
| 5. | Dealings in the Collateral |
| 5.1 | Restricted dealings in Collateral |
The Grantor must not do or agree to do any of the following unless it is expressly permitted to do so by another provision in a Transaction Document: (a) create or allow to exist another interest in any of the Collateral; (b) sell, assign, transfer or otherwise dispose of, or part with possession of, any of the Collateral; or (c) give control of any of the Collateral to any person other than the Secured Party.
| 5.2 | Security Interests created by law |
(a) Where, by mandatory operation of law, the Secured Party may not restrict the creation of any Security Interest over any Collateral, clause 5.1 will not restrict that creation but, before creating that Security Interest, each Grantor must ensure that the relevant secured party enters into a Priority Deed granting first ranking priority to the Security over that Collateral. (b) Until the Secured Party receives a duly executed Priority Deed, it is not required to provide any further financial accommodation under any Transaction Document.
| 6. | General undertakings |
| 6.1 | Duration of undertakings |
The Grantor’s undertakings in this clause 6 and clauses 7 and 8 remain in full force and effect from the date of this Deed until the Security has been discharged in full under clause 4.
| 6.2 | Transaction undertakings |
The Grantor must: (a) (obligations) comply with its obligations under each Transaction Document; (b) (no default) ensure that no Event of Default occurs; and (c) (undertakings) ensure that each undertaking given by it or its lawyers or another person on its behalf to the Secured Party or its lawyers in connection with this Deed is complied with.
| 6.3 | Information undertakings |
The Grantor must: (a) (Default) notify the Secured Party of any Default (and the steps, if any, being taken to remedy it) promptly on becoming aware of its occurrence; (b) (change in identifiers) notify the Secured Party, and provide full details, at least 14 days before: (i) it changes its name; (ii) any ABN, ARBN or ARSN allocated to it changes or is cancelled or otherwise ceases to apply to it or, if it does not have an ABN, ARBN or ARSN, one is allocated or otherwise starts to apply to it; or (iii) it becomes trustee of a trust which is not identified in this Deed; (c) (other information) ensure that the Secured Party is promptly given any other information which it reasonably requests in relation to the Grantor, any of the Collateral or any trust of which it is trustee.
| 6.4 | Securities undertakings |
The Grantor must: (a) (Certificates and Transfers) deposit with the Secured Party or its nominee on or before the date of this Deed: (i) copies of all Certificates in respect of the Securities; (ii) the number of Transfers (in form and substance satisfactory to the Secured Party) specified by the Secured Party in respect of the Securities; and (iii) any other agreements or documents in connection with the Securities that the Secured Party may reasonably require; and (b) (registration) if the Secured Party requests at any time while an Event of Default subsists, promptly ensure that the Securities are registered in the name of the Secured Party or its nominee.
| 6.5 | New Rights undertakings |
If, at any time after the date of this Deed, a Grantor becomes entitled to any New Rights, the Grantor must: (a) (notify) notify the Secured Party or its nominee, with reasonable details, as soon as it becomes aware of its entitlement to New Rights (and provide the Secured Party or its nominee with all original entitlement notices in respect of those New Rights and any other documents or agreements relating to them promptly on receipt); (b) (subscribe) if the Secured Party requests, subscribe for, take up or exercise, at its own cost, all New Rights that it becomes entitled to in accordance with the reasonable directions of the Secured Party; and (c) (provide documents) deposit with the Secured Party or its nominee, promptly after they are acquired, all Certificates in respect of the New Rights and the number of Transfers (in form and substance satisfactory to the Secured Party) specified by the Secured Party in respect of those New Rights.
| 7. | Distributions and voting rights |
| 7.1 | Grantor’s rights before Default |
(a) Subject to the provisions of this clause 7.1, while no Default subsists (or until the Securities are registered in the name of the Secured Party or its nominee), each Grantor: (i) is entitled to receive and retain for its own account all Distributions in respect of its Securities; (ii) may exercise all voting powers in respect of the Securities as it sees fit without the need for any consent or directions from the Secured Party; and (iii) may and, if requested by the Secured Party to do so under clause 6.5(b), must, at its own cost, subscribe for, take up or exercise New Rights in respect of its Securities. (b) The Grantor may only receive Distributions in respect of its Securities to the extent they are permitted to be declared, made or paid under the Principal Agreement. (c) The Grantor must not exercise any voting powers in respect of the Securities in any way that would or may adversely affect the value of the Securities or which has or is likely to cause or contribute to a Material Adverse Change.
| 7.2 | Grantor’s rights after Default |
If a Default subsists (or if any Securities are at any time registered in the name of the Secured Party or its nominee), the rights of the Grantor under clause 7.1 immediately cease and: (a) the Grantor must ensure that all Distributions in respect of its Securities are paid directly to the Secured Party for application in accordance with clause 13 or, if applicable, in accordance with clause 1 or for any other purpose which the Secured Party approves; (b) the Secured Party may exercise all voting powers in respect of the Securities as it thinks fit and the Grantor must exercise all voting powers in respect of the Securities in accordance with the Secured Party’s directions; and (c) the Secured Party may subscribe for, take up or exercise all New Rights and the Grantor must subscribe for, take up or exercise its New Rights, at their own cost and expense, in accordance with the Secured Party’s directions. The Secured Party, a Receiver or an Attorney may exercise any of the Powers in this clause 7.2 in any way it chooses, including by doing nothing, and is not responsible for any Liability arising from acting or choosing not to act, even if it has reason to believe that any Collateral may depreciate in value or it considers that any act or omission may cause a Material Adverse Change.
| 8. | Further assurance matters |
| 8.1 | General further assurance |
The Grantor agrees to do anything the Secured Party requests for the purposes of: (a) providing more effective security over the Collateral for payment or repayment of the Secured Moneys; (b) ensuring that the Security is enforceable, perfected (including, where possible, by possession and control in addition to Registration) and effective; (c) ensuring that the Security has the priority it is expressly stated to have in this Deed; (d) enabling the Secured Party to register or otherwise perfect, or give any notification in connection with, the Security so that it has the priority required by the Secured Party; (e) enabling the Secured Party or a Receiver or an Attorney to exercise any Powers; (f) enabling the Secured Party to register the power of attorney in clause 10 or a similar power; (g) binding the Grantor under the Transaction Documents; and (h) showing whether the Grantor is complying with the Transaction Documents. This may include obtaining consents, executing and delivering blank Transfers, signing and producing any other documents, getting documents completed and signed, delivering any Certificates, supplying information or giving notices of any Security to any third party.
| 8.2 | Registrations by the Secured Party |
Grantor shall register the Security. The Secured Party may, at the Grantor’s cost and expense, apply for any Registration in connection with the Security. This includes a Registration for whatever class of collateral the Secured Party thinks fit. Each Grantor agrees not to make any Amendment Demand in connection with the Security, except in the case of a manifest error in any Registration.
| 8.3 | Assistance by the Grantor |
The Grantor must do all things reasonably required by the Secured Party to ensure that this Deed is registered with any Government Agency specified by the Secured Party if the Secured Party determines that registration is necessary to perfect the Security or to protect any Power.
| 8.4 | Stamping |
The Grantor must ensure that this Deed is stamped for the proper amount within the period provided by law in each State and Territory of Australia in which it is required to be stamped.
| 8.5 | Rectification of the Grantor’s default |
If the Grantor defaults in performing any of its obligations under this Deed, the Secured Party or any person it nominates may, without prejudice to any other Power, do all things necessary or desirable to make good or attempt to make good that default to the satisfaction of the Secured Party. If the Secured Party does so, the Grantor agree to pay the Secured Party’s costs and expenses on demand. The Secured Party does not become a mortgagee in possession because it exercises its rights under this clause 8.5.
| 9. | Enforcement of Security |
| 9.1 | Effect of Event of Default |
Upon the occurrence of an Event of Default, the Security and each Collateral Security will immediately become enforceable without the need for any demand or notice to be given to the Grantor or any other person. Upon the occurrence of an Event of Default, the Secured Moneys will immediately become payable at the Secured Party’s option (despite any delay or previous waiver of the right to exercise that option) without the need for any demand or notice to be given to the Grantor or any other person (other than a demand or notice expressly required to be given by the terms of a Transaction Document).
| 9.2 | No further dealing in Collateral |
Any right of the Grantor to deal, for any purpose, with any asset which forms part of the Collateral, other than by or through a Receiver, immediately ceases if the Secured Party takes any step to enforce the Security.
| 9.3 | Assistance in enforcement |
At any time while the Security is enforceable, the Grantor must take all action required by the Secured Party, a Receiver or an Attorney to assist any of them to realise the Collateral and exercise any Power including: (a) executing all transfers, conveyances, assignments and assurances of any of the Collateral; (b) giving all notices, orders, directions and consents which they consider expedient; and (c) doing anything necessary or desirable under the laws of any place where the Collateral is situated.
| 10. | Attorneys |
| 10.1 | Appointment |
Where an Event of Default is continuing, each Grantor, for valuable consideration and to secure the performance of its obligations under this Deed, irrevocably appoints the Secured Party, each of its Authorised Representatives and each Receiver individually as its attorney to do anything on its behalf and in its name or in the name of the Attorney which: (a) the Grantor must do under this Deed or under any applicable law in connection with this Deed; (b) the Grantor is entitled to do for the purpose of giving effect to, or exercising, any of its rights, powers, authorities, discretions or remedies under this Deed or any document or agreement forming part of the Collateral; (c) the Grantor can lawfully authorise an Attorney to do in connection with this Deed or the Collateral; (d) the Attorney considers necessary or desirable to do for more satisfactorily securing the payment or repayment of the Secured Moneys in a manner consistent with the Transaction Documents; (e) the Attorney considers necessary or desirable to do to give effect to, or to exercise, a Power or for securing, perfecting, registering, preserving or giving effect to the Security; (f) the Attorney is expressly empowered to do under a Transaction Document on its behalf; or (g) the Attorney considers necessary or desirable to do to prove in the Liquidation of the Grantor. This includes completing any Transfer, delivering any Certificates, signing and delivering any other documents, transferring or selling Collateral, sending any instructions (including electronic messages or other electronic communications) by which any Securities can be transferred or otherwise dealt with and starting, conducting and defending legal proceedings. The Grantor agrees to ratify anything an Attorney lawfully does on its behalf.
| 11. | Receivers |
| 11.1 | Power to appoint a Receiver |
The Secured Party may appoint a Receiver in respect of the Grantor or the Collateral: (a) at any time while the Security is enforceable; or (b) if a Grantor requests it to do so.
| 11.2 | Terms of appointment |
The Secured Party may: (a) appoint a Receiver to all or any part of the Collateral or its income; (b) appoint more than one Receiver and specify whether they may act jointly or severally or jointly and severally; (c) fix the Receiver’s remuneration at any figure the Secured Party determines appropriate and direct payment of the Receiver’s remuneration, costs, charges and expenses out of the money applied under clause 13; and (d) remove a Receiver and appoint a new or an additional Receiver (including on the removal, retirement or death of a Receiver).
| 11.3 | Receiver is the Grantor’s agent |
Except to the extent otherwise provided by any law relating to Liquidation, each Receiver is the agent of the Grantor and the Grantor is solely responsible for the Receiver’s acts and defaults and for its remuneration, costs, charges and expenses.
| 11.4 | Powers of Receiver |
Unless the terms of a Receiver’s appointment restrict its powers, a Receiver appointed in respect of any Collateral has, in addition to any Powers conferred on it by law and whether or not it is in possession of that Collateral, full power to do all or any of the following: (a) (possession) take possession or control, or give up or re-take possession or control, of any Collateral as often as it chooses; (b) (income) obtain or manage income from any Collateral; (c) (monetary claims) collect any monetary claims forming part of the Collateral or sell, factor or discount any of them on any terms it thinks fit; (d) (bank accounts) operate a Proceeds Account or any other bank account forming part of the Collateral and do all things necessary or desirable to obtain immediate repayment of any money credited to a Proceeds Account or any other bank account, and any interest payable on that money, without being responsible for any Liability; (e) (options) grant to any person an option to purchase any Collateral; (f) (sell) sell or concur in selling any Collateral to any person on such terms and special conditions as it thinks fit and whether: (i) by auction, private treaty or tender or in one lot or in separate parcels or in conjunction with the sale of any property by any other person; and (ii) for cash or for a deferred payment of the purchase price, in whole or in part, with or without interest or security; (g) (acquire) acquire any interest in any property, in its name or in the name or on behalf of the Grantor, which on acquisition forms part of the Collateral; (h) (surrender) surrender or transfer any Collateral to any person or exchange any Collateral with any person for any other property whether of equal value or not; (i) (employ) employ or discharge any person as an employee, contractor, agent, professional adviser or auctioneer in connection with any of its Powers or delegate any of its Powers to any person; (j) (enforce) exercise or obtain the benefit of, or refrain from exercising or obtaining the benefit of, any right, power, authority, discretion or remedy of the Grantor which forms part of the Collateral, including any voting right or power and any right or power in respect of any New Rights; (k) (moneys) give effectual receipts for all moneys and other assets which come into its hands and pay any cost or other debt owing by the Grantor or any other person; (l) (proceedings) commence, discontinue, prosecute, defend, settle or compromise, any proceedings in its name or in the name or on behalf of the Grantor in relation to any Collateral; (m) (documents) enter into and execute any document or agreement in its name or in the name or on behalf of the Grantor for any of the purposes of this Deed; (n) (register) obtain registration of any Collateral in the name of the Secured Party or its nominee; (o) (incidentals) do anything necessary or incidental to the exercise of any of its Powers or anything else the law allows an owner of the Collateral to do; and (p) (delegate) delegate to any person any Powers of the Receiver.
| 11.5 | Nature of Receiver’s Powers |
The Powers of a Receiver must be construed independently and no one Power limits the generality of any other Power. Any dealing under any Power of a Receiver will be on the terms and conditions the Receiver thinks fit.
| 11.6 | Status of Receiver after commencement of winding up |
The power to appoint a Receiver under clause 11.1 may be exercised even if, at the time an Event of Default occurs or at the time a Receiver is appointed, the Liquidation of any Grantor has occurred or will occur. If for any reason, including operation of law, a Receiver appointed in the circumstances described in clause 11.1 or appointed at any other time ceases to be the agent of the Grantor as a result of the Liquidation of a Grantor, the Receiver immediately becomes the agent of the Secured Party. The Secured Party may give up possession of any Collateral and terminate any receivership or agency at any time.
| 12. | Exercise of Powers |
| 12.1 | Powers of enforcement |
The Security may be enforced even if the Secured Party accepts any part of the Secured Moneys after an Event of Default or there has been another Event of Default. The Security may be enforced without the need for any notice to, or any consent or agreement of, the Grantor or any other person. The Secured Party, a Receiver or an Attorney may postpone or delay the exercise of any Power for such period as it may in its absolute discretion decide.
| 12.2 | Receiver’s Powers |
At any time while the Security is enforceable, the Secured Party may exercise any Powers that may be exercised by a Receiver, whether or not a Receiver has not been appointed, without notice to the Grantor or any other person and without taking possession of any Collateral. It may exercise those Powers through one or more agents, in which case anything done or incurred by an agent will be taken to be done or incurred by the Secured Party.
| 12.3 | Completion of Transfers |
At any time while the Security is enforceable, the Secured Party or any of its Authorised Representatives or agents or a Receiver or Attorney may complete, in favour of the Secured Party or its nominee or any purchaser as the Secured Party directs, any Transfers deposited with the Secured Party under this Deed and, in exercising any power of sale, may deliver any Transfers and any Certificates to any purchaser of the Collateral to which they relate.
| 12.4 | No obligation to enforce payment |
The Secured Party, a Receiver or an Attorney may (but is not obliged to): (a) notify any debtor or member of the Grantor or any other person of the Security; (b) enforce payment of any money payable to the Grantor which forms part of the Collateral or take any step or proceeding for any similar purpose; and (c) vote at any meeting of shareholders in respect of any Securities may exercise voting rights in any way it chooses, including by doing nothing.
| 12.5 | No liability as mortgagee in possession |
If the Secured Party, a Receiver or an Attorney exercises any Power to take possession of any Collateral, it has complete and unfettered discretion as to how that Collateral is managed and it is not deemed to be a mortgagee in possession and it is not liable: (a) to account as a mortgagee in possession or for anything except actual receipts; or (b) for any Liability on realisation or for any act or omission for which a mortgagee in possession might be liable.
| 13. | Application and receipts of money |
| 13.1 | Order of application |
(a) Subject to any applicable law to the contrary and after satisfaction of any claims that the Secured Party or a Receiver is aware are claims ranking in priority to the Security, all money received or recovered under or because of this Deed may be applied towards payment or repayment of the Secured Moneys in the order, and to satisfy any part of the Secured Moneys, as the Secured Party or the Receiver sees fit. (b) The Secured Party or a Receiver may round amounts to the nearest Australian Dollar in making any application under clause . (c) Any application under clause 13.1(a) will override any appropriation made by the Grantor. (d) Any surplus will belong to the Grantor or any other person entitled to it. The Secured Party or a Receiver may pay the surplus to the credit of a bank account in the name of the Grantor or any other person entitled to it or into court and the Secured Party will then have no further liability in respect of it. The surplus will not accrue interest.
| 13.2 | Only actual receipts are credited |
In applying any money towards payment or repayment of the Secured Moneys, the Grantor’s account will only be credited with the amount of money which is actually received by the Secured Party for that purpose. The credit dates from the time of receipt. Where the Secured Party has appointed a Receiver, the credit dates from the time it receives payment from the Receiver.
| 14. | General indemnity |
The Grantor must immediately on demand by the Secured Party, indemnify the Secured Party, each Receiver and Attorney (and their respective officers, employees and agents) against any Liability arising as a result of or in connection with any Default, failure to exercise Powers, any indemnity given by the Secured Party to an External Administrator of the Grantor, the Security or Collateral or any investigation or litigation with respect to the Grantor, the Collateral or transaction contemplated by a Transaction Document.
| 15. | Third party saving provisions |
| 15.1 | Grantor’s liability not affected |
The Security, each Collateral Security and the obligations of the Grantor under the Transaction Documents are absolute, binding and unconditional in all circumstances and are not released, reduced, discharged or otherwise affected by any act, omission, matter or thing which, but for this clause 15.1, would or might reduce, release, discharge or prejudicially affect
them or in any way relieve the Grantor from any obligation under any Transaction Document. This clause 15.1 applies irrespective of the consent or knowledge, or lack of consent or knowledge, of the Secured Party or any other person and irrespective of any law to the contrary. References in this clause 15.1 to “any person” include the Grantor, any person who grants a Collateral Security and any other person.
| 15.2 | Grantor’s intent |
Without prejudice to the generality of clause 15.1, the Grantor acknowledges and confirms that the Security extends to the ultimate balance of the Secured Moneys as varied from time to time, including as a result of the creation or amendment of any new or existing Transaction Document or the provision of new or further financial accommodation to any person who grants a collateral security, whether or not with notice to, or the consent or agreement of, the Grantor.
| 15.3 | Proving for claims in a Liquidation |
If required by the Secured Party, the Grantor must prove in any Liquidation of any other person liable to pay the Secured Moneys for all moneys owed by other person to the Grantor. Each Grantor irrevocably authorises the Secured Party and each of its Authorised Representatives to prove in the Liquidation of any person who grants a Collateral Security for all money which the Grantor can claim against it on any account. The Secured Party need only account to the Grantor for dividends it receives in excess of the Secured Moneys, without interest. The receipt of any distribution, dividend or other payment by the Secured Party out of or relating to any Liquidation of any person who grants a Collateral Security will not prejudice the right of the Secured Party to recover the Secured Moneys by enforcement of this Deed or the Security.
| 15.4 | Deferral of the Grantor’s rights |
Until the Security has been discharged in full under clause 4 and unless the Secured Party otherwise directs in writing (in which case the Grantor must comply with that direction), each Grantor is not entitled to and must not claim or receive the benefit of any Security Interest, indemnity by any other person, any legal or other proceedings in relation to a Collateral Security or any right of set-off.
| 16. | General saving provisions |
| 16.1 | Exclusion of moratorium |
To the full extent permitted by law, a provision of any legislation which directly or indirectly: (a) lessens, varies or affects in favour of the Grantor any obligations under a Transaction Document; or (b) stays, postpones or otherwise prevents or prejudicially affects the exercise of any Power, is negatived and excluded from the Transaction Documents and all relief and protection conferred on the Grantor by or under that legislation is also negatived and excluded.
| 16.2 | Consents and approvals |
(a) Whenever the doing of anything by the Grantor is dependent upon the consent, approval or satisfaction of the Secured Party, the Secured Party may withhold its consent or approval, or give it conditionally or unconditionally, and may be satisfied or unsatisfied in each case in its absolute discretion, unless expressly stated otherwise in a Transaction Document. (b) Any conditions imposed on the Grantor under clause 16.4(a) must be complied with by the Grantor. (c) Subject to any express provision in any Transaction Document to the contrary, neither the Secured Party nor any Receiver or Attorney is liable (whether in negligence, breach of contract or otherwise) in respect of any opinions or statements given or made, or any consent or approval or failure to give any consent or approval, or any instructions or failure to give any instructions, in any case by any of them
| 16.3 | Waivers |
A waiver by the Secured Party of any rights or Powers arising from a breach of a Transaction Document or on the occurrence of a Default must be in writing and signed by the Secured Party. A failure or delay in exercise, or partial exercise, of a right or Power arising from a breach of a Transaction Document or on the occurrence of a Default does not result in a waiver of that right or Power.
| 17. | PPS saving provisions |
| 17.1 | Exclusion of PPSA provisions |
To the extent the law permits: (a) for the purposes of sections 115(1) and 115(7) of the PPSA: (i) the Secured Party need not comply with sections 95, 118, 121(4), 125, 130, 132(3)(d) or 132(4) of the PPSA; and (ii) sections 142 and 143 of the PPSA are excluded; (b) for the purposes of section 115(7) of the PPSA, the Secured Party need not comply with sections 132 and 137(3) of the PPSA; and (c) if the PPSA is amended after the date of this Deed to permit the Grantor and the Secured Party to agree not to comply with or to exclude other provisions of the PPSA, the Secured Party may notify the Grantor that any of those provisions are excluded or that the Secured Party need not comply with any of those provisions. This clause 17.1 does not affect any Powers the Secured Party has or would have other than by reason of the PPSA and applies despite any other provision in a Transaction Document.
| 17.2 | Exercise of Powers outside the PPSA |
If the Secured Party exercises a Power in connection with a PPSA Security Interest created by this Deed, that exercise is taken not to be an exercise of a right, power or remedy under the PPSA unless the Secured Party states otherwise at the time of exercise or that Power can only be exercised under the PPSA.
| 17.3 | No notice required unless mandatory |
To the extent the law permits, the Grantor waives its rights to receive any notice that is required by any provision of the PPSA (including a notice of a Verification Statement) or any other law requiring notice before a Secured Party or a Receiver exercised any power. If the law which requires a period of notice or a lapse of time cannot be excluded but provides that the period of notice or lapse of time may be agreed, that period or lapse is one day or the minimum period which the law allows to be agreed (whichever is the longer). However, nothing in this clause 17.3 prohibits the Secured Party or any Receiver from giving a notice under the PPSA or any other law.
| 17.4 | Confidentiality agreement |
Except to the extent section 275(7) of PPSA applies, the Grantor and the Secured Party agree that neither will disclose information of the kind mentioned in section 275(1) of PPSA that is not publicly available. To the extent permitted by law, each Grantor agrees not to exercise its rights to make any request of the Secured Party, under section 275 of the PPSA, to authorise the disclosure of any information under that section or to waive any duty of confidence that would otherwise require non-disclosure under that section.
| 18. | General |
| (a) | Any notice, demand or other communication to be given to or by a party under this Deed must be given in accordance with the notice requirements of the Principal Agreement. |
| (b) | Any provision of this Deed which is illegal or invalid in any jurisdiction must in relation to that jurisdiction be: (a) read down to the minimum extent necessary to achieve its legality or validity (if applicable); and (b) severed from this Deed in any other case, without invalidating or affecting the remaining provisions of this Deed or the legality or validity of that provision in any other jurisdiction. |
| (c) | Subject to the terms of any other Transaction Document, this Deed cannot be amended or varied except by deed properly executed and delivered by the Grantor and the Secured Party. |
| (d) | This Deed may be executed in any number of counterparts, each executed by one or more parties and will constitute one instrument. |
| (e) | To the extent permitted by law, a party may sign this Deed electronically, including by using software or a platform for the electronic execution of contracts. A print out of the executed Deed once all parties signing electronically have done so, will be an executed original counterpart of this Deed, irrespective of which party prints it. No person may challenge the validity of this Deed by virtue only of the fact that it has been electronically signed by or on behalf of any party. |
| (f) | This Deed is governed by, and must be construed in accordance with, the laws of Victoria and of the Commonwealth of Australia applying in Victoria. |
Schedule 1 – Shares
| Name and address of Issuer |
Grantor |
Beneficial owner |
No. and class of shares |
Share certificate number | ||||
| True Gold Consortium Pty Ltd ACN 641 483 374 of 51B Marlow Street, Wembley, Western Australia 6014 | Security Matters Limited ACN 626 192 998 of Level 25, 525 Collins Street, Melbourne, Victoria 3000, Australia | Security Matters Limited ACN 626 192 998 | 50,000 Ordinary fully paid | 2 |
Executed as a deed
| Executed by Security Matters Limited ACN 626 192 998 in accordance with section 127(1) of the Corporations Act 2001 (Cth): | ||||
| Signature of director | Signature of director or company secretary* | |||
| *delete whichever does not apply | ||||
| Name (please print) | Name (please print) | |||
| Signed for and on behalf of [_____] |
||||
| k | ||||
| Signature of authorised representative | ||||
| By executing this agreement the representative states that he has received no notice that his authority to do so has been revoked. | ||||
| Name of authorised representative (please print) | ||||
Exhibit 4.31
EMPATAN PUBLIC LIMITED COMPANY
15% Senior Convertible Notes Due 2024
Growth Financing Termsheet
The proposed summary terms set forth below are set forth herein for discussion purposes only, are not binding, and are subject to, among other things, the completion of due diligence review and execution and delivery of definitive documentation.
| Growth Financing | ||
| Issuer | Empatan Public Limited Company, an Ireland corporation (the “Company”) | |
| Types of Securities | 15% Senior Convertible Notes due December 31, 2024 (the “Notes”) and Redeemable Warrants (as hereinafter defined) | |
| Closing Date | Upon the consummation of the Business Combination (as hereinafter defined) | |
| Offering Structure | The offering (the “Offering”) shall be structured as a transaction exempt from Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), and shall comply with Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D thereunder and applicable state securities law. | |
| Subscriber Requirements | Subscriber is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act) of 1933, as amended (the “Securities Act”) or an “accredited investor” (within the meaning of Rule 501(a) under the Securities Act). | |
| Minimum Investment | US$250,000 | |
| Offering Size | Up to US$10.0MM | |
| Commissions; Finders Fees | The Company reserves the rights to pay commissions and finders’ fees | |
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| Notes | ||
| Security | 15% Senior Convertible Notes due December 31, 2024 | |
| Interest | 15% per annum, payable quarterly in arrears | |
| Maturity Date | The earlier of December 31, 2024 and the date of any Change in Control (as herein after defined), excluding the Business Combination.
A “Change in Control” will be deemed to exist if (i) there occurs any consolidation, merger or other business combination of the Company, other than the Business Combination, with or into any other corporation or other entity or person (whether or not the Company is the surviving corporation), or any other corporate reorganization or transaction or series of related transactions in which in any of such events the voting stockholders of the Company prior to such event cease to own 50% or more of the voting power, or corresponding voting equity interests, of the surviving corporation after such event (including without limitation any “going private” transaction under Rule 13e-3 promulgated pursuant to the Exchange Act or tender offer by the Company under Rule 13e-4 promulgated pursuant to the Exchange Act for 50% or more of the Company’s Common Stock), (ii) any person (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), together with its affiliates and associates (as such terms are defined in Rule 405 under the Act), beneficially owns or is deemed to beneficially own (as described in Rule 13d-3 under the Exchange Act without regard to the 60-day exercise period) in excess of 50% of the Company’s voting power, (iii) there is a replacement of more than one-half of the members of the Company’s Board of Directors which is not approved by those individuals who are members of the Company’s Board of Directors immediately prior to such replacement, (iv) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the assets of the Company, determined on a consolidated basis. | |
| “Business Combination” shall mean a business combination of the Company with Security Matters Limited, an Australian public corporation, and Lionheart III Corp., a Delaware corporation | ||
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| Priority | All obligations under the Notes shall be senior unsecured obligations of the Company | |
| Prepayment | The Notes may be prepaid at any time, in whole or in part, without penalty or premium, at any time upon 30 days prior written notice to the holders. | |
| Conversion | The Notes shall be convertible, by written notice of the noteholder to Company into shares of common stock of the Company at a conversion price of US$10.00 per share, subject to mechanical adjustments | |
| Covenants | Restrictions on dividends, certain notice requirements, etc. | |
| Events of Default | Any event of default under any of the Note, failure to pay principal and interest when due; breach of covenants; false or misleading representations, warranties, or certifications; final judgments in excess of US$1,000,000 not discharged or stayed after applicable periods; certain events of bankruptcy or insolvency, limitations on debt incurrence, and limitations on dividends. | |
| Repayment Option | The Company shall be entitled to satisfy the payment of the principal amount of the Notes through the issuance of shares of Common Stock based upon a 20% discount to the 20 trading day VWAP preceding the Maturity Date with no floor. | |
| Redeemable Warrants | ||
| Securities Offered | Common Stock Purchase Warrants (the “Redeemable Warrants”) to purchase shares of common stock (the “Common Stock”), of the Company | |
| Term | Five years from the closing of the Business Combination, subject to earlier redemption | |
| Shares Issuable Upon Exercise of the Redeemable Warrants | An aggregate of up to 500,000 shares of Common Stock, issued proportionally to the Notes sold by the Company (i.e.., 500,000 shares in the event the entire $10,000,000 of Notes shall be issued) | |
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| Adjustments; Reorganizations | The exercise price of the Redeemable Warrants and the number of shares subject thereto shall be subject to adjustment in the event of stock splits, stock dividends, reverse stock splits, and similar events. The Redeemable Warrants shall contain standard reorganization provisions. | |
| Exercise Price | US$11.50, subject to such adjustments as shall be included in the Public Warrants (as hereinafter defined), provided, however, that the Company retains the right to lower the exercise price for periods of time not to exceed 30 days | |
| Redemption | The Warrants shall be redeemable at the option of the holder as provided below. 50.00% of the Warrants shall be redeemable on a non-cumulative basis at the option of the holder during the 30 days following the second and third, Business Combination for US$5.00 per Warrant Share. Notwithstanding the foregoing, at the option of each investor, the Company may satisfy any or each such redemption through the issuance of shares of Common Stock based upon a 20% discount to the 20 trading day VWAP preceding each such anniversary with no floor. | |
| Exercise Mechanism | Cash only | |
| Bonus Warrants | ||
| Securities Offered | Common Stock Purchase Warrants (the “Bonus Warrants”) to purchase shares of Common Stock. The Bonus Warrants shall be identical to the public warrants (the “Public Warrants”) of the Company | |
| Term | Five years commencing upon the Business Combination | |
| Shares Issuable Upon Exercise of the Bonus Warrants | An aggregate of up to 500,000 shares of Common Stock, issued proportionally to the indebtedness drawn upon by the Company Subscriber, or (D) when such securities shall have ceased to be outstanding. | |
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| Adjustments; Reorganizations | The Bonus Warrants shall have adjustment and reorganization provisions identical to those of the Public Warrants | |
| Exercise Price | US$11.50, subject to such adjustments as shall be included in the Public Warrants | |
| Redemption | The Bonus Warrants shall have redemption provisions identical to those of the Public Warrants | |
| Exercise Mechanism | Cash only | |
| General Provisions | ||
| Funding Upon Closing of Business Combination | Offering shall fund upon the closing of the Business Combination | |
| Registration Rights | Within thirty (30) calendar days after the consummation of the Business Combination, the Company will file with the Securities and Exchange Commission (at the Company’s sole cost and expense) a registration statement to register under and in accordance with the provisions of the Securities Act, the resale of all Registrable Securities on Form S-3, Form F-3, Form S-1 or Form F-1, as applicable. | |
| Registrable Securities | “Registrable Securities” means, as of any date of determination, the securities issuable upon exercise of the Redeemable Warrants (collectively, the “Warrant Shares”) and any other equity security issued or issuable with respect thereto by way of share split, dividend, distribution, recapitalization, merger, exchange, replacement or similar event, provided, however, that such securities shall cease to be Registrable Securities at the earliest of (A) two (2) years after the Closing Date, (B) the date all Securities held by Subscriber may be sold by Subscriber without volume or manner of sale limitations pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable), (C) the date on which such securities have actually been sold by | |
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| Confidentiality | Subject to applicable law, this Term Sheet is confidential, and neither the contents nor the details of this Term Sheet may be shown or disclosed by either party hereto except to those individuals who have a need to know as a result of being involved in the proposed transaction. No press or other publicity release will be issued to the general public concerning the proposed transaction without mutual consent unless required by law or the rules of a relevant stock exchange, and then only to the extent required. | |
| Governing Law | State of Delaware | |
| Wire Instructions | Investors should wire investment proceeds to:
Account Name: Security Matters Limited Melbourne VIC 3000 BSB: 083-004 Account: 86-616-2705 SWIFT: NATAAU33033
Unless by date of payment Company provided a different bank account. | |
| ACCEPTED AND AGREED TO AS OF ________, 2023: | ||||||
| SECURITY MATTERS LIMITED |
INVESTOR: | |||||
| By: | By: | |||||
| Name: | Name: | |||||
| Title: |
Title: | |||||
| Note Value: US$ ________ | ||||||
| Redeemable Warrants: ________ (fifth of | ||||||
| the Dollar amount) | ||||||
| Bonus Warrants: ________ (Fourth of the redeemable warrants amount) | ||||||
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| EMPATAN PLC | ||
| By: |
||
| Name: | ||
| Title: | ||
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Exhibit 4.32
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF REGISTRATION OF THE RESALE THEREOF UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY IN FORM, SCOPE AND SUBSTANCE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
AMENDED AND RESTATED PROMISSORY NOTE
| Principal Amount: not to exceed $549,000 | Dated as of March 7, 2023 (the “Amendment Date”) |
SMX (Security Matters) Public Limited Company (f/k/a Empatan Public Limited Company), a public limited company organized under the laws of Ireland (the “Maker” or “Company”), promises to pay to the order of Lionheart Management, LLC and Lionheart Equities, LLC or its assigns or successors in interest (the “Payee”) the principal sum of Five Hundred and Forty Nine Thousand Dollars ($549,000.00) plus interest in lawful money of the United States of America, on the terms and conditions described below. All payments on this Amended and Restated Promissory Note (“Note”) shall be made by check or wire transfer of immediately available funds or as otherwise determined by the Maker to such account as the Payee may from time to time designate by written notice in accordance with the provisions of this Note.
This Note amends and restates that certain Promissory Note dated [ ] (the “Original Note”), executed by Lionheart III Corp (“Lion”) in favor of the Payee, in the original aggregate principal amount of $549,000, to reflect the assumption of all rights and responsibilities of Lion by the Maker. All references to the Maker herein shall be to SMX (Security Matters) Public Limited Company.
| 1. | Principal. The Payee has made advances to Maker under this Note in the amount of Five Hundred and Forty Nine Thousand Dollars ($549,000.00). |
| 2. | Interest. Interest shall accrue on the unpaid principal balance of this Note from the Amendment Date at the rate of 10% per annum, payable quarterly in arrears, which may, at the option of the Payee, be waived in lieu of additional Bonus Warrants at a price of $0.10 per Bonus Warrant. |
| 3. | Maturity Date: This Note shall mature and become immediately due and payable on the earlier of (a) March 31, 2024; (b) the payment of any of the certain bridge loans (the “Bridge Loans”) by and between the Maker and (i) Journee Investments, (ii) Afik Investments, (ii) 33 Capital/Ohad Betzaig, (iv) Amos Rabber, (v) Alberto Morales, (vi) Boon Hui Khoo, (vii) Bassat Investment, (viii) Harold Charles Mitchell Investment, (ix) Mulloway Investment, (x) PMB Partners LP, (xi) MHM Fasteners Ltd. (xii) Kyle Hoffman or (xiii) Kimea; and (c) a Change of Control. |
| 4. | Redeemable Warrants. In connection with the entry into this Note, the Payee shall receive Common Stock Purchase Warrants (the “Redeemable Warrants”) to purchase up to an aggregate of 100,000 ordinary shares of the Maker’s common stock. The Redeemable Warrants shall be issued in an amount equal to 1.00% of the principal amount of this Note and have a term of five years from the date hereof. The exercise price of the Redeemable Warrants and the number of shares subject thereto shall be subject to adjustment to account for any stock splits, stock dividends, reverse stock splits, and similar events. The Exercise Price of the Redeemable Warrants shall be $11.50, subject to the adjustment provisions contained in the Maker’s public warrants. Half of the Redeemable Warrants shall be redeemable at the option of the Payee on a non-cumulative basis during the 30 days following each of the first and second anniversaries of the date hereof for $5.00 per warrant share; provided that at the option of the Payee, the Maker may satisfy any or each such redemption through the issuance of shares of the Maker’s Common Stock at a 20% discount to the 20 trading day volume weighted average price preceding each such anniversary. |
| 5. | Bonus Warrants. In connection with the entry into this Note, the Payee shall receive Common Stock Purchase Warrants (the “Bonus Warrants”) to purchase up to an aggregate of 5,000 ordinary shares of the Maker’s common stock. The Bonus Warrants shall be issued in an amount equal to 0.5% of the the principal amount of this Note and have a term of five years from the date hereof. The exercise price of the Bonus Warrants and the number of shares subject thereto shall be subject to adjustment to account for any stock splits, stock dividends, reverse stock splits, and similar events. The Exercise Price of the Bonus Warrants shall be $11.50, subject to the adjustment provisions contained in the Maker’s public warrants. The Bonus Warrants shall have the same redemption and reorganization provisions contained in the Maker’s public warrants. |
| 6. | Registration Rights. Within thirty (30) calendar days after the consummation of the Business Combination, the Company will file with the Securities and Exchange Commission (at the Company’s sole cost and expense) a registration statement to register under and in accordance with the provisions of the Securities Act, the resale of all Registrable Securities on Form S-3, Form F-3, Form S-1 or Form F-1, as applicable. |
“Registrable Securities” means, as of any date of determination, the securities issuable upon exercise of the Redeemable Warrants and the Bonus Warrants (collectively, the “Warrant Shares”) and any other equity security issued or issuable with respect thereto by way of share split, dividend, distribution, recapitalization, merger, exchange, replacement or similar event, provided, however, that such securities shall cease to be Registrable Securities at the earliest of (A) two (2) years from the date hereof, (B) the date all Registrable Securities held by Payee may be sold by Payee without volume or manner of sale limitations pursuant to Rule 144 and without the requirement for the Company to be in compliance with the current public information required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable), (C) the date on which such securities have actually been sold by Payee, or (D) when such securities shall have ceased to be outstanding
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| 7. | Application of Payments. All payments shall be applied first to payment in full of any costs incurred in the collection of any sum due under this Note, including (without limitation) reasonable attorney’s fees, then to the payment in full of any late charges, then to the payment in full of any interest and finally to the reduction of the unpaid principal balance of this Note. |
| 8. | Priority. All obligations under this Note shall be secured by a first priority security interest in FIFTY THOUSAND (50,000) shares of True Gold Consortium PTY Ltd. ACN 641 483 374 (the “Collateral”) shared pro rata with the Bridge Loan Parties. Except as described in Section 9 hereof, Maker hereby represents and warrants that the Collateral is free and clear from any other pledge or other encumbrance, other than the obligations described in the Constitution of True Gold Consortium PTY Ltd. and will remain so for so long as they are pledged to Payee. |
| 9. | Senior Status of Note. The obligations of the Maker under this Note shall be senior to all other existing indebtedness and equity of the Maker. The Note shall be pari passu with up to $5 million aggregate principal amount of the Bridge Loans (together with this Note, the “Senior Notes”). Upon any Event of Default, the Payee will be entitled to receive, before any distribution or payment is made upon, or set apart with respect to, any indebtedness of the Maker junior to the Senior Notes or any class of capital stock of the Maker, an amount equal to the principal amount plus all accrued and unpaid interest thereon and any and all other amounts due hereunder. |
| 10. | Conversion Right. Subject to the terms and conditions of this Note, on the date hereof, the Payee shall have the right to convert this Note and all of the rights, covenants, agreements and obligations set forth herein, including but not limited to all outstanding principal and any interest accrued and unpaid on the principal, into a number of fully paid and non-assessable restricted shares of the common stock of the Maker (the “Conversion Shares”), based on a conversion price equal to a 20% discount to the closing price of Lion’s Class A Common Stock on the date of this Note. Upon such conversion, the Payee shall not have any interest in or title to this Note and all obligations under this Note and any security interests relating thereto shall cease and be of no further force or effect. Any election to convert this Note in accordance with the terms and conditions of this Section 10, shall be made by written notice (which may be e-mail notice) to the Maker on such date. |
| 11. | Warrant Exchange. Subject to the terms and conditions of this Note and notwithstanding anything to the contrary in the Redeemable Warrants and Bonus Warrants (collectively, the “Warrants”), on the date hereof, the Payee shall have the right to exchange the Warrants for one (1) fully paid and non-assessable restricted share of the common stock of the Maker for every two (2) such Warrants so exchanged (the “Exchange Shares”), at which time the Payee shall not have any interest in or title to the Warrants and all obligations under the Warrants shall cease and be of no further force or effect. Any election to exchange the Warrants in accordance with the terms and conditions of this Section 11, shall be made by written notice (which may be e-mail notice) to the Maker on the date hereof. |
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| 12. | Issuance of Shares. Upon any election by the Payer pursuant to Section 10 and/or Section 11 above, (a) if applicable, this Note will be cancelled on the books and records of the Maker and Security Matters Limited, and the Payee shall only have the right to receive the Conversion Shares pursuant to Section 10 above, (b) if applicable, the Warrants will be terminated and cancelled on the books and records of the Maker and Security Matters Limited, and the Payee shall only have the right to receive the Exchange Shares pursuant to Section 11 above and (c) to the extent of any such conversion and/or exchange, the Maker shall promptly (but in no event more than five (5) business days) after the date hereof, deliver or cause to be delivered to the Payee, in the name of the Payee, a stock certificate (or evidence from the transfer agent of book-entry shares) representing the Conversion Shares and/or Exchange Shares, as the case may be, with such restrictions on transferability as may be required under applicable law. |
| 13. | Lock-Up. In the event of any election by the Payee pursuant to Section 10 and/or Section 11 above, during the period commencing on the date of issuance of any Conversion Shares and/or Exchange Shares and continuing through the close of trading on the Nasdaq Stock Market on the six (6) month anniversary of the Trigger Date, Payee agrees, directly or indirectly, on behalf of itself and each affiliate (as defined in Rule 405 under the Securities Act of 1933, as amended), that it will not, and will cause each of its affiliates not to, (a) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, any of such Conversion Shares and/or Exchange Shares (collectively the “Lock-Up Securities”), (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (a) or (b) is to be settled by delivery of Lock-Up Securities, in cash or otherwise, (c) make any demand for or exercise any right with respect to the registration of any Lock-Up Securities; or (d) publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement relating to any Lock-Up Securities. Payee also agrees and consents to the entry of stop transfer instructions with the Maker’s transfer agent and registrar against the transfer of such Lock-Up Securities except in compliance with the foregoing restrictions. |
For purposes of this Section 13, “Trigger Date” means the later of the date upon which YA II PN, LTD., a Cayman Islands exempt limited partnership (the “Investor”), advances to the Maker (i) the first pre-paid advance in the amount of $1,500,000 and (ii) the second pre-paid advance in the amount of $2,00,000; pursuant to that Reciprocal Standby Equity Purchase Agreement dated as of February 23, 2023, by and between the Investor and Lion.
| 14. | Covenants. For so long as this Note is outstanding: |
| (a) | Sale of Collateral; Liens. From the date hereof until the full release of the security interest in the Collateral, (i) the Maker shall not sell, lease, transfer or otherwise dispose of any of the Collateral; and (ii) (A) the Maker shall not, directly or indirectly, create, permit or suffer to exist any lien, security interest or other encumbrance on the Collateral, except as otherwise described in this Note and (B) the Maker shall defend the Collateral against and take such other action as is necessary to remove, any lien, security interest or other encumbrance on the Collateral. |
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| (b) | Restricted Payments. The Maker shall not declare or pay any dividend on, or make any payment on account of, or set apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any capital stock or equivalent interest (or any right or option to purchase any of the foregoing), whether in cash or property or obligations of the Maker (collectively, “Restricted Payments”). |
| (c) | Notice of Negotiations. Subject to applicable law, rules, and regulations, the Maker shall give the Payee prompt written notice upon entering into any negotiations related to a transaction that is reasonably likely to result in a Change of Control. Without limiting the generality of the foregoing, the Maker shall give the Payee written notice of its intent to enter into an agreement that would result in a Change of Control no later than ten days prior to the execution of any such agreement. |
“Change of Control” will be deemed to exist if (i) there occurs any consolidation, merger or other business combination of the Company, other than the Business Combination, with or into any other corporation or other entity or person (whether or not the Company is the surviving corporation), or any other corporate reorganization or transaction or series of related transactions in which in any of such events the voting stockholders of the Company prior to such event cease to own 50% or more of the voting power, or corresponding voting equity interests, of the surviving corporation after such event (including without limitation any “going private” transaction under Rule 13e-3 promulgated pursuant to the Securities Exchange Act of 1943, as amended (the “Exchange Act”) or tender offer by the Company under Rule 13e-4 promulgated pursuant to the Exchange Act for 50% or more of the Maker’s Ordinary Shares), (ii) any person (as defined in Section 13(d), or similar securities laws of the applicable jurisdictions, of the Exchange Act, together with its affiliates and associates (as such terms are defined in Rule 405 under the Act), beneficially owns or is deemed to beneficially own (as described in Rule 13d-3 under the Exchange Act without regard to the 60-day exercise period) in excess of 50% of the Company’s voting power, (iii) there is a replacement of more than one-half of the members of the Company’s Board of Directors which is not approved by those individuals who are members of the Company’s Board of Directors immediately prior to such replacement, (iv) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the assets of the Company, determined on a consolidated basis.
“Business Combination” means the business combination by and among the Company, Lion, Security Matters Limited and Aryeh Merger Sub, Inc. pursuant to that certain business combination agreement dated July 26, 2022.
| (d) | Notice of Business Combination. The Maker shall give the Payee written notice of the Business Combination within three (3) Business Days of the closing thereof. |
5
| 15. | Events of Default. The following shall constitute an event of default (“Event of Default”): |
| (a) | Failure to Make Required Payments. Failure by Maker to pay the principal or interest of this Note when due and payable. |
| (b) | Final Judgments. Any final judgment against Make or any of its subsidiaries in excess of $1,000,000 not discharged or stayed after applicable cure periods. |
| (c) | Voluntary Liquidation, Etc. The commencement by Maker or any of its subsidiaries of a proceeding relating to its or their bankruptcy, insolvency, reorganization, rehabilitation or other similar action, or the consent by it to the appointment of, or taking possession by, a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) for Maker or any of its subsidiaries or for any substantial part of its property, or the making by Maker or any of its subsidiaries of any assignment for the benefit of creditors, or the failure of Maker or any of its subsidiaries generally to pay their debts as such debts become due, or the taking of corporate action by Maker or any of its subsidiaries in furtherance of any of the foregoing. |
| (d) | Involuntary Bankruptcy, Etc. The entry of a decree or order for relief by a court having jurisdiction in the premises in respect of Maker or any of its subsidiaries in an involuntary case under any applicable bankruptcy, insolvency or similar law, for the appointing of a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) for Maker, or any of its subsidiaries, or for any substantial part of its property, or ordering the winding-up or liquidation of the affairs of Maker, and the continuance of any such decree or order unstayed and in effect for a period of 60 consecutive days. |
| (e) | Bridge Loans. An Event of Default under any of the Bridge Loans. |
| 16. | Remedies Upon an Event of Default. Upon the occurrence of any Event of Default, the Maker shall, as promptly as possible but in any event within three (3) Business Days of the occurrence of such Event of Default, notify the Payee of the occurrence of such Event of Default, describing the event or factual situation giving rise to the Event of Default and specifying the relevant subsection or subsections of Section 15 hereof under which such Event of Default has occurred. If an Event of Default shall have occurred and shall be continuing, the Payee of this Note may at any time declare the entire unpaid principal balance of this Note, together with all interest accrued hereon, due and payable, and thereupon, the same shall be accelerated and so due and payable, without presentment, demand, protest, or notice, all of which are hereby expressly unconditionally and irrevocably waived by the Maker. No course of delay on the part of the Payee shall operate as a waiver thereof or otherwise prejudice the rights of the Payee. No remedy conferred hereby shall be exclusive of any other remedy referred to herein or now or hereafter available at law, in equity, by statute, in the Share Pledge, or otherwise. |
6
“Share Pledge” means that certain Share Pledge dated as of even date herewith, between Maker and Payee granting a security interest in the Collateral.
| 17. | Guarantee. Lion and Security Matters Limited (collectively, the “Guarantors”) hereby jointly and severally guarantee the prompt payment and performance in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on the amounts due under this Note. The Guarantors hereby jointly and severally agree that if the Maker shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the amounts due under this Note, the Guarantors will promptly pay the same in cash, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the amounts due under this Note, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. |
| 18. | Enforcement Expenses. The Maker agrees to pay all costs and expenses of enforcement of this Note and all costs and expenses incurred during any workout, restructuring or negotiations in respect of this Note, including, without limitation, reasonable attorneys’ fees and expenses. |
| 19. | Remedies. |
| (a) | Upon the occurrence of an Event of Default specified in Section 4(a) hereof, Payee may, by written notice to Maker, declare this Note to be due immediately and payable, whereupon the unpaid principal amount of this Note, and all other amounts payable thereunder, shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived, anything contained herein or in the documents evidencing the same to the contrary notwithstanding. |
| (b) | Upon the occurrence of an Event of Default specified in Sections 4(b) and 4(c), the unpaid principal balance of this Note, and all other sums payable with regard to this Note, shall automatically and immediately become due and payable, in all cases without any action on the part of Payee. |
| 20. | Waivers. Maker and all endorsers and guarantors of, and sureties for, this Note waive presentment for payment, demand, notice of dishonor, protest, and notice of protest with regard to the Note, all errors, defects and imperfections in any proceedings instituted by Payee under the terms of this Note, and all benefits that might accrue to Maker by virtue of any present or future laws exempting any property, real or personal, or any part of the proceeds arising from any sale of any such property, from attachment, levy or sale under execution, or providing for any stay of execution, exemption from civil process, or extension of time for payment; and Maker agrees that any real estate that may be levied upon pursuant to a judgment obtained by virtue hereof, on any writ of execution issued hereon, may be sold upon any such writ in whole or in part in any order desired by Payee. |
7
| 21. | Unconditional Liability. Maker hereby waives all notices in connection with the delivery, acceptance, performance, default, or enforcement of the payment of this Note, and agrees that its liability shall be unconditional, without regard to the liability of any other party, and shall not be affected in any manner by any indulgence, extension of time, renewal, waiver or modification granted or consented to by Payee, and consents to any and all extensions of time, renewals, waivers, or modifications that may be granted by Payee with respect to the payment or other provisions of this Note, and agrees that additional makers, endorsers, guarantors, or sureties may become parties hereto without notice to Maker or affecting Maker’s liability hereunder. |
| 22. | Notices. Any notice called for hereunder shall be deemed properly given if (i) sent by certified mail, return receipt requested, (ii) personally delivered, or (iii) dispatched by any form of private or governmental express mail or delivery service providing receipted delivery to the following addresses or to such other address as either party may designate by notice in accordance with this Section: |
If to Maker:
SMX (Security Matters) Public Limited Company
Mespil Business Centre
Mespil House
Sussex Road
Dublin 4
D04 T4A6
Attention: Haggai Alon
Email: haggai@securitymattersltd.com
If to Payee:
Lionheart Equities, LLC
200 W. Cypress Creek Road, Suite 500
Fort Lauderdale, FL 33309
Notice shall be deemed given on the earlier of (i) actual receipt by the receiving party, (ii) the date reflected on a signed delivery receipt, or (iii) two (2) business days following tender of delivery or dispatch by express mail or delivery service.
| 23. | Construction. THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAW PROVISIONS THEREOF. |
| 24. | Jurisdiction. The courts of the State of New York have exclusive jurisdiction to settle any dispute arising out of or in connection with this agreement (including a dispute relating to any non-contractual obligations arising out of or in connection with this agreement) and the parties submit to the exclusive jurisdiction of the courts of State of New York. |
8
| 25. | Severability. Any provision contained in this Note which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. |
| 26. | MFN. Notwithstanding any other provision in this Note, the Maker hereby represents, warrants and agrees that the terms and conditions offered to the Payee under this Note are at least as favorable to the terms and conditions offered to the parties to the Bridge Loans (each a “Bridge Loan Party”) and in no event shall the Maker consent to or permit any term or condition of any Bridge Loan to be more favorable to such Bridge Loan Party than those of the Payee under this Note. |
If the Company enters into a subsequent financing (other than standard commercial credit arrangements) with any third party on terms that are more favorable to such third party than the terms of this Note and the warrant issued in connection herewith, this Note and such warrant may together be exchanged, for no additional consideration, for securities in such subsequent financing issuable upon an investment of the then outstanding principal amount of this Note.
| 27. | Amendment; Waiver. Any amendment hereto or waiver of any provision hereof may be made with, and only with, the written consent of the Maker and the Payee. |
| 28. | Assignment. No assignment or transfer of this Note or any rights or obligations hereunder may be made by any party hereto (by operation of law or otherwise) without the prior written consent of the other party hereto and any attempted assignment without the required consent shall be void. |
| 29. | Further Assurance. The Maker shall, at its own cost and expense, execute and do (or procure to be executed and done by any other necessary party) all such deeds, documents, acts and things as the Payee may from time to time require as may be necessary to give full effect to this Promissory Note. |
[remainder of page intentionally left blank]
9
IN WITNESS WHEREOF, Maker, intending to be legally bound hereby, has caused this Note to be duly executed on the day and year first above written.
| SMX (SECURITY MATTERS) PUBLIC LIMITED COMPANY | ||
| By: | /s/ Haggai Alon | |
| Name: Haggai Alon Title: CFO | ||
[Signature Page to Promissory Note]
Exhibit 15.1
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
Defined terms included below shall have the same meaning as terms defined and included elsewhere in the report on Form 20-F of which this exhibit forms a part (the “Report”).
Introduction
The following unaudited pro forma condensed combined financial information is provided to aid you in your analysis of the financial aspects of the Business Combination. The unaudited pro forma condensed combined financial information has been derived from the historical financial statements of Lionheart and SMX and the related notes incorporated by reference into the Report and should be read in conjunction with the accompanying notes to the pro forma financial information. The unaudited pro forma condensed combined financial information should also be read together with “Lionheart’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Security Matters’ Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other financial information which are incorporated by reference within the Report and included elsewhere in the Proxy Statement/Prospectus.
The following unaudited pro forma condensed combined financial statements present the combination of certain financial information of Lionheart and the Company, adjusted to give effect to the Business Combination. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”
Lionheart was formed as a Delaware corporation on January 14, 2021. Lionheart was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses or entities.
Security Matters Limited is a company incorporated under the laws of Australia and provides one solution to solve both authentication and track and trace challenges in order to uphold supply chain integrity and provide quality assurance and brand accountability to producers of goods. Its technology works as a track and trace system using a marker, a reader and an algorithm to identify embedded sub-molecular particles in order to track and trace different components along a production process (or any other marked good along a supply chain) to the end producer.
The unaudited pro forma condensed combined statement of financial position as of June 30, 2022 combines the consolidated historical statements of financial position of SMX and the historical balance sheet of Lionheart on a pro forma basis as if the Business Combination had been consummated on June 30, 2022.
The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2022 and for the year ended December 31, 2021 combines the consolidated historical statement of operations of SMX and Lionheart for such periods on a pro forma basis as if the Business Combination had been consummated on January 1, 2021.
The unaudited pro forma condensed combined financial information has only been presented for illustrative purposes. The financial results may have been different had SMX and Lionheart been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had SMX and Lionheart been combined or the future results that the Company will experience after giving effect to the Business Combination. Further, the unaudited pro forma condensed combined financial information may not be useful in predicting the future financial condition and results of operations of the Company after giving effect to the Business Combination. The actual financial position and results of operations of the Company may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
The unaudited pro forma adjustments represent the Company’s management’s estimates based on information available as of the date of the unaudited pro forma condensed combined financial information and is subject to, and may differ materially from, the information presented as additional information becomes available and analyses are performed. The Company’s management believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination based on information available to SMX’s management at this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information has been prepared with respect to the actual redemption of Lionheart’s Class A Common Stock such that Lionheart Public Stockholders holding 12,196,947 Lionheart Class A Common Stock exercised their redemption rights for $123,189,000 of funds in the Trust Account, resulting in $3,061,000 remaining in the Trust Account. The per share redemption price was based on the offering price of $10.10 per share. The actual redemption price is $10.233 which reflects the additional extension payment.
This information should be read together with the following:
| • | SMX’s audited financial statements and related notes as of December 2021 and for the years ended December 31, 2021 and 2020; |
| • | SMX’s unaudited interim condensed consolidated financial statements and related notes as of June 30, 2022 and for the periods ended June 30, 2022 and 2021 |
| • | “Security Matters’ Management’s Discussion and Analysis of Financial Condition and Results of Operations”; |
| • | Lionheart’s audited financial statements and related notes as of December 31, 2021 and for the period from January 14, 2021 (inception) through December 31, 2021; |
| • | Lionheart’s unaudited condensed financial statements and related notes as of June 30, 2022 and for the periods ended June 30, 2022 and 2021; |
| • | “Lionheart’s Management’s Discussion and Analysis of Financial Condition and Results of Operations”; and |
| • | other financial information incorporated by reference within the Report and included elsewhere in the Proxy Statement/Prospectus. |
Accounting for the Business Combination
The Business Combination will be accounted for as an assets acquisition, with no goodwill or other intangible assets recorded, in accordance with IFRS. The Company will account for the merger using the reverse acquisition method in accordance with the principles of IFRS 3. This results in SMX being identified as the accounting acquirer, and the Parent/Lionheart being identified as the accounting acquirees. Under the reverse acquisition method, the accounting acquirer is deemed to have issued shares to obtain control of the acquirees. However, since the Parent and Lionheart are not businesses as defined in IFRS 3, the transaction is not a business combination. Based on IFRS 3’s provisions, such a transaction is accounted for in the consolidated financial statements of the Parent (the legal acquirer) as a continuation of the financial statements of SMX (the legal acquiree), together with a deemed issuance of shares by SMX at fair value and a re-capitalization of its equity. This deemed issuance of shares is in fact both an equity transaction under IAS 32 (receiving the net assets of Lionheart, primarily cash) and an equity-settled share-based payment transaction under IFRS 2 (receiving the listing status of the Parent/Lionheart). The difference between the fair value of the shares deemed to have been issued by SMX and the fair value of Lionheart’s identifiable net assets represents a payment for the service of obtaining a stock exchange listing for its shares, and not considered a cost of raising capital. Therefore, it is expensed immediately to profit or loss at Closing Date. Transaction costs are allocated on a relative fair value basis of the amounts allocated to each equity transaction as mentioned above, such that the amount attributed to the equity transaction is deducted from equity and the amount attributed to the listing service is charged as expense in profit or loss. The determination of SMX as the accounting acquirer is based on an evaluation of the following facts and circumstances:
| • | SMX Shareholders will have the largest voting rights in Parent after giving effect to the Business Combination, under all redemption scenarios; |
| • | SMX accounts for the majority of representatives in the governing body of the Parent, the Board of Directors; |
| • | SMX’s senior management will continue in their respective roles in the Parent after giving effect to the Business Combination; |
| • | SMX’s operations will substantially comprise the ongoing operations of SMX after giving effect to the Business Combination; and |
| • | SMX is the larger entity, in terms of substantive operations and employee base. |
Unaudited Pro Forma Combined Balance sheet
June 30, 2022
| (all amounts in 000 USD) | (b) Lionheart US GAAP |
(c) IFRS Adjustments |
(d) Lionheart IFRS |
(e) Security Matters |
Pro Forma Adjustments |
Pro Forma |
||||||||||||||||||
| (Actual Redemptions) | ||||||||||||||||||||||||
| Assets |
||||||||||||||||||||||||
| Current assets |
||||||||||||||||||||||||
| Cash and cash equivalents |
906 | 906 | 858 | 126,425 | (f) | 9,110 | ||||||||||||||||||
| 4,110 | (o) | |||||||||||||||||||||||
| (123,189 | )(i) | |||||||||||||||||||||||
| Other receivables |
2,455 | (1,027 | )(j) | 1,428 | ||||||||||||||||||||
| Prepaid expenses and other current assets |
241 | 241 | 241 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total current assets |
1,147 | — | 1,147 | 3,313 | 6,319 | 10,779 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Non-current assets |
||||||||||||||||||||||||
| Property and equipment |
1,082 | 1,082 | ||||||||||||||||||||||
| Intangible assets |
4,856 | 4,856 | ||||||||||||||||||||||
| Investments in joint ventures |
117 | 117 | ||||||||||||||||||||||
| Marketable securities held in Trust Account |
126,425 | 126,425 | 0 | (126,425 | )(f) | 0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total non-current assets |
126,425 | — | 126,425 | 6,055 | (126,425 | ) | 6,055 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total assets |
127,572 | — | 127,572 | 9,368 | (120,106 | ) | 16,834 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Liabilities |
||||||||||||||||||||||||
| Current liabilities |
||||||||||||||||||||||||
| Trade payables |
1,196 | 1,196 | 1,615 | (293 | )(j) | 2,518 | ||||||||||||||||||
| Other payables |
60 | 60 | 705 | 16,842 | (j) | 17,607 | ||||||||||||||||||
| Warrants |
1,014 | 1,014 | (l | ) | 1,014 | |||||||||||||||||||
| Convertible notes |
569 | (569 | )(h) | 0 | ||||||||||||||||||||
| Borrowings from related parties |
165 | 165 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total current liabilities |
1,256 | 1,014 | 2,270 | 3,054 | 15,980 | 21,304 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Non-current liabilities |
||||||||||||||||||||||||
| Secured notes |
4,110 | (o) | 4,110 | |||||||||||||||||||||
| Lease liability |
458 | 458 | ||||||||||||||||||||||
| Deferred underwriting payable |
4,375 | 4,375 | (4,375 | )(g) | 0 | |||||||||||||||||||
| Other liabilities |
106 | 714 | (n) | 820 | ||||||||||||||||||||
| Redeemable shares |
122,163 | 122,163 | (122,163 | )(i) | 0 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total non-current liabilities |
4,375 | 122,163 | 126,538 | 564 | (121,714 | ) | 5,388 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total liabilities |
5,631 | 123,177 | 128,808 | 3,618 | (105,734 | ) | 26,692 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Equity |
||||||||||||||||||||||||
| Issued capital, additional paid in capital and warrants |
126,250 | (122,349 | ) | 3,901 | 28,737 | 569 | (h) | 68,148 | ||||||||||||||||
| (3,202 | )(j) | |||||||||||||||||||||||
| 11,599 | (k) | |||||||||||||||||||||||
| 1,532 | (m) | |||||||||||||||||||||||
| (3,901 | )(k) | |||||||||||||||||||||||
| Share based payment reserve |
3,708 | (1,532 | )(m) | 2,219 | ||||||||||||||||||||
| 43 | (m) | |||||||||||||||||||||||
| Foreign currency translation reserve |
(416 | ) | (416 | ) | ||||||||||||||||||||
| Accumulated losses |
(4,309 | ) | (828 | ) | (5,137 | ) | (26,279 | ) | (14,374 | )(j) | (50,896 | ) | ||||||||||||
| (43 | )(m) | |||||||||||||||||||||||
| 5,137 | (k) | |||||||||||||||||||||||
| (9,486 | )(k) | |||||||||||||||||||||||
| (714 | )(n) | |||||||||||||||||||||||
| Total equity |
121,941 | (123,177 | ) | (1,236 | ) | 5,750 | (14,372 | ) | (9,858 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total liabilities and equity |
127,572 | 0 | 127,572 | 9,368 | (120,106 | ) | 16,834 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Pro Forma Adjustments and Assumptions to the unaudited Pro Forma Combined Balance Sheet
| (a) | The Parent was formed in July 2022, and will have no results of operations until the completion of this Transaction. Therefore, its historical results of operations are not shown in a separate column in the unaudited pro forma combined balance sheet and profit or loss. |
| (b) | Derived from Lionheart’s unaudited interim financial statements as of June 30, 2022 which have been prepared in accordance with U.S. GAAP. The $126,250 Class A Common Stock subject to possible redemption are classified in temporary equity under U.S GAAP. |
| (c) | Adjustments made to present Lionheart balance sheet in accordance with IFRS: |
| • | Reclassification of Lionheart’s ordinary shares ($ 126,250) subject to redemption as long term liabilities measured at amortized cost using the effective interest method under IFRS. |
| • | Reclassification of accretion to amount subject to redemption ($ 12,261) from additional paid in capital ($ 9,647) and from accumulated losses ($ 2,614) to redeemable shares liability ($ 4,087) and accumulated losses ($ 8,174) in order to recognize the accretion on the basis of passage of time using the effective interest method under IFRS, based on updated estimates at balance sheet date. |
| • | Reclassification of share warrants ($ 5,747) from equity to derivative financial liabilities at fair value as of the date of filing, $0.09, under IFRS |
| (d) | Represents Lionheart’s balance sheet after adjustments to IFRS. |
| (e) | Derived from Security Matters’ unaudited interim financial statements as of June 30, 2022 which have been prepared in accordance with IFRS. |
| (f) | Represents the release of cash from marketable securities held in the trust account. |
| (g) | Represents the waiver of the payment by the underwriters at Closing. |
| (h) | Represents the conversion of convertible notes to ordinary shares of SMX at Closing. |
| (i) | Represents the cash disbursement from the trust account to public SPAC shareholders resulting from the actual redemption at Closing of 97.58% redeemable ordinary shares, where the remaining amount (representing 303,053 shares) is retained in the trust account and classified to equity. |
| (j) | Represents payables to settle the actual transactions costs of $17.5M to be incurred in connection with the Transactions, of which, as of June 30, 2022, $1.027M have been incurred and $0.734M also paid. The transaction costs related to acquire Lionheart’s net assets are recognized directly in equity and the those related to obtain listing status are charged to profit or loss. The allocation was made on a relative fair value basis of the amounts of consideration attributed to each component. |
| (k) | Represents the effects of the recapitalization at Closing where Security Matters is the accounting acquirer, and the elimination of historical issued capital and additional paid in capital and accumulated losses of Lionheart. The adjustment as a reduction in accumulated losses reflects the difference between the fair value of the shares deemed to have been issued to Lionheart shareholders by Security Matters and the fair value of Lionheart’s net assets acquired, in accordance with IFRS 2. The adjustment reflects the number of shares outstanding following 97.58% Redemptions. |
| (l) | Represents the warrants in the Parent forming part of Lionheart’s net assets. The warrants are derivative financial liabilities in accordance with IFRS. The fair value is the market price of $0.12 as of the date of filing. As reflected from the Business Combination Agreement, the Parent’s warrants have the same fair value as Lionheart’s warrants prior to Closing. |
| (m) | Represents Security Matters’ share based payment schemes. Upon Transaction, some fully vested options are converted to ordinary shares of the Parent ($1,532) and for other unvested options, acceleration of vesting as a result of becoming fully vested for which the future remaining expenses ($43) are recognized immediately in accordance with IFRS 2. The remaining reserve balance represents the total of outstanding fully vested options over the Parent shares. |
| (n) | Represents the liability payble for the loan bonus to related parties upon completion of the Transactions, for the amount of ILS 2.5M (USD 714 thousand as converted to US dollar by using the ILS/USD exchange rate of 0.2857 for the balance sheet). As of June 30, 2022 the carrying amount of the liability for the bonus is nil. Refer also to Note 10 of SMX financial statements for 2021. |
| (o) | Represents notes issued to finance the Transactions, payable according to the schedule agreed with the lenders that is in effect at Closing Date. |
Unaudited Pro Forma Combined Statement of Profit and Loss
For The Six Months Ended June 30, 2022
| Pro Forma adjustments |
Pro Forma |
|||||||||||||||||||||||
| (all amounts in 000 USD) | Lionheart US GAAP |
IFRS Adjustments | Lionheart IFRS |
Security Matters |
(Actual Redemptions) | |||||||||||||||||||
| Research and development expenses, net |
933 | 43 | (c) | 976 | ||||||||||||||||||||
| Selling and marketing expenses |
378 | 378 | ||||||||||||||||||||||
| General and administrative expenses |
1,513 | 1,513 | 1,200 | 2,713 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Operating Loss |
1,513 | 1,513 | 2,511 | 43 | 4,067 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Finance expenses |
6,812 | (a) | 6,812 | 36 | 6,848 | |||||||||||||||||||
| Finance income |
(174 | ) | (174 | ) | (105 | ) | 174 | (b) | (105 | ) | ||||||||||||||
| Income taxes |
14 | 14 | (14 | )(b) | 0 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss for the period |
1,353 | 6,812 | 8,165 | 2,442 | 203 | 10,810 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Pro Forma Adjustments and Assumptions to the unaudited Pro Forma Combined Statement of Profit and Loss
| (a) | Adjustment made to record the periodic charge of the accretion amount on the redeemable shares in profit or loss using the effective interest method in accordance with IFRS based on updated estimates at balance sheet date. |
| (b) | Elimination of finance income net of tax earned from securities held in the Trust Account |
| (c) | The adjustment reflects acceleration of vesting of unvested options as a result of becoming fully vested upon Transactions for which the future remaining expenses are recognised immediately in accordance with IFRS 2 |
Unaudited Pro Forma Combined Statement of Profit and Loss
For The Year Ended December 31, 2021
| Pro Forma adjustments |
Pro Forma |
|||||||||||||||||||||||
| (all amounts in 000 USD) | Lionheart US GAAP |
IFRS Adjustments |
Lionheart IFRS |
Security Matters |
(Actual Redemptions) | |||||||||||||||||||
| Research and development expenses, net |
2,039 | 194 | (d) | 2,233 | ||||||||||||||||||||
| Selling and marketing expenses |
453 | 453 | ||||||||||||||||||||||
| General and administrative expenses |
345 | 345 | 2,482 | 12,324 | (b) | 23,365 | ||||||||||||||||||
| 81 | (d) | |||||||||||||||||||||||
| 8,133 | (c) | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Operating Loss |
345 | 345 | 4,974 | 20,732 | 26,051 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Finance expenses |
1,362 | (a) | 1,362 | 101 | 717 | (e) | 2,180 | |||||||||||||||||
| Finance income |
(2 | ) | (4,733 | )(a) | (4,735 | ) | (237 | ) | (4,972 | ) | ||||||||||||||
| Share of losses of joint ventures |
101 | 101 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net loss (profit) for the year |
343 | (3,371 | ) | (3,028 | ) | 4,939 | 21,449 | 23,361 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Pro Forma Adjustments and Assumptions to the unaudited Pro Forma Combined Statement of Profit and Loss
| (a) | Adjustments made to record the periodic charge ($ 1,362) of the accretion amount on the redeemable shares ($ 12,261) in profit or loss using the effective interest method and to record the gain from revaluation of warrants to fair value ($ 4,480) in accordance with IFRS. |
| (b) | Represents the transaction costs related to listing service that are charged to general and administrative expenses. |
| (c) | The adjustment to general and administrative expenses reflects the service of obtaining a stock exchange listing in accordance with IFRS 2 and is calculated as the difference between the fair value of the shares deemed to have been issued to Lionheart shareholders by Security Matters and the fair value of Lionheart’s net assets acquired, in accordance with IFRS 2. The adjustment reflects the number of shares outstanding following 97.58% Redemptions. |
| (d) | The adjustment reflects acceleration of vesting for unvested options as a result of becoming fully vested upon Transactions for which the future remaining expenses are recognised immediately in accordance with IFRS 2 |
| (e) | Represents the difference between the payables for the loan bonus to related parties and the carrying amount of the liability for the bonus as of 31 December, 2021. Refer also to Note 10 of SMX financial statements for 2021. |
| (all amounts in 000 USD, except of share and per share data) | Pro Forma (Actual Redemptions) |
|||
| Six months ended June 30, 2022 |
||||
| Pro forma net loss attributable to equity holders of the Parent |
10,810 | |||
|
|
|
|||
| Pro forma weighted average number of Parent Ordinary Shares outstanding |
||||
| Parent Ordinary Shares issued to Security Matters Shareholders |
18,673,253 | |||
| Parent Ordinary Shares issued to Lionheart Class A and Class B shareholders |
3,828,053 | |||
|
|
|
|||
| Pro forma weighted average number of Parent Ordinary Shares outstanding – basic and diluted |
22,501,306 | |||
| Pro forma net loss per share – basic and diluted ($) |
0.48 | |||
|
|
|
|||
| (all amounts in 000 USD, except of share and per share data) | Pro Forma (Actual Redemptions) |
|||
| Year ended December 31, 2021 |
||||
| Pro forma net loss attributable to equity holders of the Parent |
23,361 | |||
|
|
|
|||
| Pro forma weighted average number of Parent Ordinary Shares outstanding |
||||
| Parent Ordinary Shares issued to Security Matters Shareholders |
18,673,253 | |||
| Parent Ordinary Shares issued to Lionheart Class A and Class B shareholders |
3,828,053 | |||
|
|
|
|||
| Pro forma weighted average number of Parent Ordinary Shares outstanding – basic and diluted |
22,501,306 | |||
| Pro forma net loss per share – basic and diluted ($) |
1.04 | |||
|
|
|
|||
IFRS 2 listing service expense calculation
| Pro Forma Adjustments |
Pro forma |
|||||||||||
| (all amounts in 000 USD) | Lionheart IFRS |
(Actual Redemptions) | ||||||||||
| Assets |
||||||||||||
| Cash and cash equivalents |
1,417 | 3,063 | 4,480 | |||||||||
| Prepaid expenses and other current assets |
269 | 269 | ||||||||||
| Prepaid expenses |
82 | 82 | ||||||||||
| Marketable securities held in Trust Account |
126,252 | (126,252 | ) | 0 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total assets |
128,020 | (123,189 | ) | 4,831 | ||||||||
|
|
|
|
|
|
|
|||||||
| Liabilities |
||||||||||||
| Trade payables |
290 | 290 | ||||||||||
| Other payables |
61 | 61 | ||||||||||
| Warrants |
1,014 | 1,014 | ||||||||||
| Deferred underwriting payable |
4,375 | (4,375 | ) | 0 | ||||||||
| Redeemable shares |
115,351 | (115,351 | ) | 0 | ||||||||
|
|
|
|
|
|
|
|||||||
| Total liabilities |
121,091 | (119,726 | ) | 1,365 | ||||||||
|
|
|
|
|
|
|
|||||||
| Net Assets |
6,929 | (3,463 | ) | 3,466 | ||||||||
|
|
|
|
|
|
|
|||||||
| Parent Per Share Value |
Actual Redemptions | |||||||||||
| Former type of Spac shares |
Parent Shares | Fair Value | ||||||||||
| Class A |
3.03 | 303,053 | 918 | |||||||||
| Class B |
3.03 | 3,525,000 | 10,681 | |||||||||
| Fair value of share consideration |
11,599 | |||||||||||
|
|
|
|||||||||||
| Fair value of Lionheart’s net assets |
3,466 | |||||||||||
|
|
|
|||||||||||
| Excess of fair value of consideration over fair value of Lionheart’s net assets (listing service expense) |
8,133 | |||||||||||
|
|
|
|||||||||||
Exhibit 15.2
Consent of Independent Registered Public Accounting Firm
We hereby consent to the incorporation by reference in this Shell Company Report on Form 20-F, of SMX (Security Matters) Public Limited Company of our report dated September 6, 2022, relating to the consolidated financial statements of Securities Matters Limited, which is contained in the Registration Statement No. 333-267301 on Form F-4 of Empatan Public Limited Company.
We also consent to the reference to us under the caption “Statement By Experts” in the Shell Company Report on Form 20-F.
/s/ Ziv Haft
Ziv Haft
Certified Public Accountants (Isr.)
BDO Member Firm
Tel Aviv, Israel
March 13, 2023
| Tel Aviv 03-6386868 |
Jerusalem 02-6546200 |
Haifa 04-8680600 |
Beer Sheva 077-7784100 |
Bnei Brak 073-7145300 |
Kiryat Shmona 077-5054906 |
Petah Tikva 077-7784180 |
Modiin Ilit 08-9744111 |
Nazrat Ilit 04-6555888 |
Main office: Beit Amot BDO, 48 Menachem Begin Road, Tel Aviv, 6618001 Email: bdo@bdo,co.il Website: www.bdo.co.il
BDO Israel, an Israeli partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firm