Item 1.01 Entry into a Material Definitive Agreement.
Private Placement of Common Stock and Warrants
On November 9, 2021, Transphorm, Inc. (the “Company”) entered into a securities purchase agreement (the “Purchase Agreement”) with one accredited investor (the “Purchaser”), pursuant to which the Company issued and sold to the Purchaser (i) 2,000,000 shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), at a purchase price of $5.00 per share (the “First Closing Shares”) and (ii) warrants to purchase an aggregate of 416,667 shares of Common Stock (the “First Closing Warrants”), for aggregate gross proceeds of $10.0 million (the “Private Placement”). The Private Placement was on the same terms and conditions as the private placement described in the Company’s Current Report on Form 8-K filed with the SEC on November 9, 2021 (the “Prior 8-K”).
The First Closing Warrants have an exercise price of $6.00 per share, provide for a cashless exercise feature, and are exercisable until the third anniversary of the date of issuance.
Pursuant to the Purchase Agreement, during the Second Investment Period (as described below), the Purchaser has the right (but not the obligation) (an “Option”), subject to the satisfaction of customary closing conditions, to purchase and acquire from the Company (i) 1,000,000 additional shares of Common Stock at a purchase price of $5.00 per share (the “Second Closing Shares”) and (ii) additional warrants to purchase 208,333 shares of Common Stock (the “Second Closing Warrants” and together with the First Closing Warrants, the “Warrants”). If and when issued, the Second Closing Warrants would have an exercise price of $6.00 per share, provide for a cashless exercise feature, and be exercisable until the third anniversary of the date of issuance of the First Closing Warrants.
As set forth in the Purchase Agreement, the “Second Investment Period” begins on the date of the Purchase Agreement and ends on the earliest to occur of: (i) the third anniversary of the applicable agreement; (ii) a Change in Control (as defined in the Purchase Agreement), provided that the Company has given the Purchaser at least 10 days’ prior written notice of such Change in Control; (iii) the tenth day after disclosure to the Purchaser of a Change in Control, but only if the Company has not given prior written notice of such Change in Control to the Purchaser in accordance with clause (ii); or (iv) the 90th day following the later of (A) the date on which a registration statement registering the resale of the First Closing Shares and the shares of Common Stock issuable upon exercise of the First Closing Warrants is declared effective by the Securities and Exchange Commission (the “SEC”), or (B) the date on which the Common Stock is first listed on Nasdaq.
The Company did not engage, or pay any commissions to, any placement agents or brokers in connection with the Private Placement.
The Purchaser also became a party to the registration rights agreement described in the Prior 8-K (the “Registration Rights Agreement”), pursuant to which the Company agreed to register: (i) the First Closing Shares and the shares of Common Stock issuable upon the exercise of the First Closing Warrants (collectively, the “First Closing Registrable Securities”) for resale, and (ii) in the event any Second Closing Shares or Second Closing Warrants are issued, to register such Second Closing Shares and the shares of Common Stock issuable upon the exercise of such Second Closing Warrants (collectively, the “Second Closing Registrable Securities” and together with the First Closing Registrable Securities, the “Registrable Securities”) for resale.
Under the terms of the Registration Rights Agreement, the Company is obligated, subject to certain exceptions, to (i) file a registration statement with the SEC covering the resale or other disposition of the Registrable Securities no later than 30 days after the issuance of the applicable securities, (ii) use its commercially reasonable efforts to cause such registration statement to become effective no later than 60 days after such registration statement is first filed with the SEC, and (iii) use its commercially reasonable efforts to keep such registration statement effective for up to three years after the date on which such registration statement is declared effective by the SEC.
In the event that the Company fails to timely file and obtain and maintain effectiveness of the registration statement, or if certain events occur with respect to the listing or trading of the Registrable Securities (such events, the “Registration Events”), the Company, subject to certain exceptions, will make payments to each holder of Registrable Securities, as liquidated damages, a cash sum calculated at a rate equal to 12% per annum of the aggregate purchase price paid by such holder pursuant to the Purchase Agreement with respect to such holder’s Registrable Securities that are affected by such Registration Event for the period during which such Registration Event continues to affect such Registrable Securities, provided that the maximum amount of liquidated damages that may be paid by the Company to a holder pursuant to such liquidated damages provisions will not exceed 5% of the aggregate purchase price paid by such holder pursuant to the Purchase Agreement with respect to such holder’s Registrable Securities that are affected by all such Registration Events.
The foregoing summaries of the Purchase Agreement, Warrants and Registration Rights Agreement are qualified in their entirety by reference to the form of Purchase Agreement, form of Warrant, and form of Registration Rights Agreement, which were filed as Exhibits 10.1, 4.1 and 10.2, respectively, to Prior 8-K and are incorporated herein by reference.