8i Acquisition 2 (NASDAQ:LAX) announced this morning that it has entered into a Prepaid Forward Agreement with a certain institutional investor just days after shareholders approved its combination with digital health firm EUDA.
Pursuant to the terms of the agreement, the investor may purchase through a broker in the open market, from holders of shares other than LAX or affiliates, 8i’s Ordinary Shares, or the investor may reverse its prior redemption rights.
While the investor has no obligation to purchase any shares under the agreement, the aggregate total Recycled Shares that may be purchased or reversed cannot be more than 1,125,000 shares. Additionally, the investor has agreed to hold the Recycled Shares for the benefit of 8i until the closing of the deal and EUDA after the closing. The seller also may not beneficially own greater than 9.9% of issued and outstanding shares following the business combination.
The agreement provides that the investor will be paid directly out of the funds from 8i’s trust account, and will be a cash amount equal to the number of shares underlying the transaction as set forth in the notice, multiplied by the per share redemption price to be paid for redeemed shares in connection with the shareholders’ vote.
In addition to the prepayment amount, the investor will be paid an amount equal to the product of 100,000 multiplied by the redemption price. This will be for the purpose of repayment of purchasing in the open market prior to closing, 100,000 shares, which will not be included in the number of shares under the agreement.
Additionally, the investor may sell the recycled shares that it purchases to terminate the agreement in respect of such recycled shares sold. The counterparty will be entitled to receive proceeds from the terminated shares equal to the product of the number of terminated shares multiplied by the reset price.
Following the Closing, the reset price will initially be $10.00 per share, but will be adjusted on each of the first and eleventh scheduled trading day of each calendar month immediately following the closing to the lowest of the then-current reset price, $10.00 and the greater of $5.00, and the quotient of the sum of the daily VWAP of the shares of the counterparty on each scheduled trading day during the ten scheduled trading day period ending, and including, the scheduled trading day immediately preceding the applicable reset date, divided by 10. However, this is provided to the extent that the counterparty sells, enters any agreement to sell or grants any right to reprice, or otherwise dispose of or issue any shares or any securities, then the price will be adjusted to equal such reduced price.
The maturity date of the transaction will be the earliest to occur of the first anniversary of the closing and the date specified by the investor in a written notice. This should occur after any occurrence wherein during any 30 consecutive trading-day period, the dollar VWAP of the shares for 20 trading days is less than $3.00 per Share. Upon the occurrence of the maturity date, the counterparty is obligated to pay to the investor an amount equal to the product of the number of recycled shares less the number of terminated shares multiplied by $2.50.
The maturity consideration will be payable by the counterparty, in cash or shares based on the daily VWAP price over 30 trading days ending on the maturity date to the extent the shares used are freely tradable by the investor, or if not freely tradeable, one trading day prior to the date on which the resale registration statement registering the shares used to pay the consideration becomes effective.
If the counterparty pays the maturity consideration in Shares, then the counterparty will pay it on a net basis such that the seller retains a number of shares due to the counterparty upon the maturity date. This will be equal to the number of consideration shares payable to the investor, only to the extent the number of shares due to counterparty upon the maturity date are equal to or more than the number of consideration shares payable to seller, with any maturity consideration remaining due to be paid to the investor in newly issued shares. If excess shares issued as maturity consideration equal 20% or more of the the counterparty’s outstanding shares, then the the counterparty will use reasonable efforts to obtain shareholder approval for the issuance of such excess shares to the extent required by the exchange on which the shares are then listed on or prior to the maturity Date.
If at the maturity date, the number of excess shares is equal to 20% or more of the counterparty’s outstanding Shares, then shareholder approval is required. If the counterparty fails to obtain the shareholder approval on or prior to the maturity date, then the counterparty will pay such portion of the merger consideration that would have otherwise corresponded to the excess shares to the investor in cash. In addition to the maturity consideration, at maturity date, the investor will be entitled to retain a cash amount equal to the product of the number of shares remaining in the transaction multiplied by the Redemption Price, and the investor will deliver the number of shares that remain in the transaction.
A break-up fee equal to all of the investor’s actual out-of-pocket reasonable fees, costs and expenses relating to the transaction plus $1 million will be payable by the counterparty and EUDA in the event that the agreement or the transaction is terminated.
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