Item 1.01 Entry into a Material Definitive Agreement.
Issuance and Sale of 5%/6% Convertible Senior PIK Toggle Notes due 2026
On July 6, 2021, Eos Energy Enterprises, Inc. (the "Company") entered into an
investment agreement (the "Investment Agreement") with Spring Creek Capital,
LLC, a wholly-owned, indirect subsidiary of Koch Industries, Inc. ("Koch")
relating to the issuance and sale to Koch of $100,000,000 in aggregate principal
amount of the Company's 5%/6% Convertible Senior PIK Toggle Notes due 2026 (the
"Notes"). The transactions contemplated by the Investment Agreement (the
"Transaction") closed on July 7, 2021 (the date on which the closing occurred,
Issuance of Convertible Notes
The Notes are governed by a form of indenture (the "Indenture") incorporated by
reference into the Notes. The Notes will bear interest at a rate of 5.00% per
annum if interest is paid in cash ("Cash Interest"), or, if interest is paid in
kind (through an increase in the principal amount of the outstanding Notes or
through the issuance of additional Notes), at a rate of 6.00% per annum ("PIK
Interest"). The Company can elect to make any interest payment through Cash
Interest, PIK Interest or any combination thereof. Interest on the Notes is
payable semi-annually in arrears on June 30 and December 30, commencing on
December 30, 2021. It is expected that the Notes will mature on June 30, 2026,
subject to earlier conversion, redemption or repurchase.
The Notes are convertible at the option of the holder at any time until the
business day prior to the maturity date, including in connection with a
redemption by the Company. The Notes will be convertible into shares of the
Company's common stock, par value $0.0001 per share, based on an initial
conversion rate of 49.9910 shares of the Company's common stock per $1,000
principal amount of the Notes (which is equal to an initial conversion price of
approximately $20.00 per share), in each case subject to customary anti-dilution
and other adjustments (as described in the Indenture).
On or after June 30, 2024, the Notes will be redeemable by the Company in the
event that the closing sale price of the Company's common stock has been at
least 130% of the conversion price then in effect for at least 20 trading days
(whether or not consecutive) during any 30 consecutive trading day period ending
on, and including, the trading day immediately preceding the date on which the
Company provides the redemption notice at a redemption price of 100% of the
principal amount of such Notes, plus accrued and unpaid interest to, but
excluding, the redemption date.
With certain exceptions, upon the occurrence of certain fundamental changes
described in the Indenture (each, a "Fundamental Change"), the holders of the
Notes may require that the Company repurchase all or part of the principal
amount of the Notes at a purchase price of 100% of the principal amount of such
Notes, plus accrued and unpaid interest to, but excluding, the Fundamental
Change repurchase date.
The Indenture includes customary "events of default," which may result in the
acceleration of the maturity of the Notes under the Indenture. The Indenture
will also include customary covenants for convertible notes of this type.
The Notes are senior unsecured obligations of the Company and rank equal in
right of payment to all senior unsecured indebtedness of the Company, and will
rank senior in right of payment to any indebtedness that is contractually
subordinated to the Notes.
Pursuant to the Investment Agreement, Koch has agreed, subject to certain
exceptions, that during the period commencing on the Closing and ending on the
one (1) year anniversary of the Closing (the "Standstill Period"), Koch will
not, among other things: (i) acquire any securities of the Company if,
immediately after such acquisition, Koch would collectively own in the aggregate
more than 20.0% of the then outstanding voting securities of the Company, (ii)
propose or seek to effect any tender or exchange offer, merger or other business
combination involving the Company or its securities, or make any public
statement with respect to such transaction, (iii) make, or in any way
participate in any "proxy contest" or other solicitation of proxies, (iv) seek
the appointment of any director or (v) call or seek to call any meeting of
stockholders or other referendum or consent solicitation.
Transfer and Conversion Restrictions; Registration Rights; Participation Rights
The Investment Agreement restricts Koch's ability to transfer or hedge the Notes
or the Company's common stock, subject to certain exceptions specified in the
Investment Agreement. In particular, prior to the one-year anniversary of the
Closing, Koch will be restricted from transferring or entering into an agreement
that transfers the economic consequences of ownership of the Notes or shares.
These restrictions do not apply to, among others, transfers to affiliates.
Subject to certain limitations, the Investment Agreement provides Koch with
certain registration rights for the Notes and shares of the Company's common
stock held by Koch, including shares of the Company's common stock issuable upon
conversion of the Notes.
The foregoing summaries of the Indenture, the Notes and the Investment Agreement
do not purport to be complete and are subject to, and qualified in their
entirety by the full text of the form of Indenture, which is attached hereto as
Exhibit 4.1 and incorporated herein by reference and the Investment Agreement,
which is attached hereto as Exhibit 10.1 and incorporated herein by reference,
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of the Registrant.
The information related to the issuance of the Notes contained in Item 1.01 of
this Current Report on Form 8-K is incorporated herein by reference.
Item 3.02 Unregistered Sales of Equity Securities.
On July 6, 2021, the Company entered into the Investment Agreement, pursuant to
which it agreed to sell $100,000,000 in aggregate principal amount of the Notes
to Koch for cash in a private placement pursuant to the exemption from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"). The Company offered and sold the Notes to Koch in reliance on
the exemption from registration provided by Section 4(a)(2) of the Securities
Act without the involvement of any underwriter. The Company relied on this
exemption from registration based in part on representations made by Koch in the
Investment Agreement. The Notes are convertible as set forth above, and any
shares of the Company's common stock issued upon conversion of the Notes will be
issued in reliance on Section 3(a)(9) of the Securities Act.
The information related to the issuance of the Notes and the underlying shares
of the Company's common stock contained in Item 1.01 of this Current Report on
Form 8-K is incorporated herein by reference.
Item 8.01 Other Events.
On July 7, 2021, the Company issued a press release announcing the Transaction.
A copy of the press release is filed as Exhibit 99.1 and incorporated herein by
Item 9.01 Financial Statement and Exhibits.
Number Description of Document
4.1 Form of Note (including Indenture incorporated by reference therein).
10.1 Investment Agreement, dated as of July 6, 2021, among Eos Energy
Enterprises, Inc. and Spring Creek Capital, LLC.
99.1 Press release dated July 7, 2021
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