Item 1.01 Entry into a Material definitive Agreement.
On September 1,
2020, Tottenham Acquisition I Limited, a British Virgin Islands company (“Tottenham”), Chelsea Worldwide
Inc., a Delaware corporation and a wholly-owned subsidiary of Tottenham (“Purchaser”), Creative Worldwide
Inc., a Delaware corporation and a wholly owned subsidiary of Purchaser (“Merger Sub,” together with
Tottenham, Purchaser, the “Purchaser Parties”), Clene Nanomedicine, Inc., a Delaware corporation
(“Clene”), and Fortis Advisors LLC, a Delaware limited liability company as the representative of the
Clene’s shareholders, entered into a Merger Agreement (the “Agreement”).
Acquisition Merger and Acquisition Consideration
Upon the closing of
the transactions contemplated in the Agreement, Tottenham will merge with and into Purchaser, resulting in all Tottenham shareholders
becoming stockholders of the Purchaser as described under Reincorporation Merger (as defined below). Immediately following the
Reincorporation Merger, Merger Sub will be merged with and into Clene, resulting in Clene being a wholly owned subsidiary of Purchaser
(“Acquisition Merger”). Upon the closing of the Acquisition Merger, each share of Purchaser common stock (“Purchaser
Common Stock”) will be entitled to one (1) vote on all matters subject to vote at general and special meetings of the
post-business combination company.
The aggregate consideration
to be paid to Clene shareholders for the Acquisition Merger is $542,540,558.06, plus the net proceeds (if any) from any new equity
investment received by the Company between the date of the Merger Agreement and the closing date of the business combination (“Clene
Equity Valuation”), payable in the form of a number of newly issued shares of Purchaser Common Stock (the “Closing
Payment Shares”) valued at the lesser of (i) $10.00 per share or (ii) Tottenham’s cash-in-trust value per share
on the trading date prior to the closing of the business combination (“Closing Price Per Share”). Under the
Merger Agreement, 5% of the Closing Payment Shares (“Escrow Shares”) to be issued will be held in escrow for
a period of 6 months after the closing to satisfy indemnification obligations.
At the closing of the
business combination, the former Tottenham security holders will receive the consideration described in “Reincorporation
Merger” below.
In addition to the
Closing Payment Shares, Clene shareholders as of immediately prior to the Acquisition Merger are entitled to receive earn-out shares
as follows:
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(i)
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3,333,333 shares of Purchaser Common Stock (“Milestone 1 Clene Earn-out Shares”)
if (A) the VWAP of the shares of Purchaser Common Stock equals or exceeds $15.00 (or any foreign currency equivalent) (the “Milestone
1 Price”) in any twenty trading days within a thirty trading day period within the three years following the closing
of the business combination on any securities exchange or securities market on which the shares of Purchaser Common Stock are then
traded or (B) the change of control price equals or exceeds the Milestone 1 Price if a change of control transaction occurs within
the three years following the closing of the business combination (the requirement set forth in clause (A) or (B), “Milestone
1”).
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(ii)
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2,500,000 shares of Purchaser Common Stock (“Milestone 2 Clene Earn-out Shares”)
if (A) the VWAP of the shares of Purchaser Common Stock equals or exceeds $20.00 (or any foreign currency equivalent) (the “Milestone
2 Price”) in any twenty trading days within a thirty trading day period within the six years following the closing of
the business combination on any securities exchange or securities market on which the shares of Purchaser Common Stock are then
traded or (B) the change of control price equals or exceeds the Milestone 2 Price if a change of control transaction occurs within
the five years following the closing of the business combination (the requirement set forth in clause (A) or (B), “Milestone
2”).
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(iii)
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2,500,000 shares of Purchaser Common Stock if Clene completes a randomized placebo-controlled study
for treatment of COVID-19 which results in a statistically significant finding of clinical efficacy within twelve (12) months after
the closing of the business combination.
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If Milestone 1 is not
achieved but Milestone 2 is achieved, the Clene stockholders will receive a catchup payment equal to the Milestone 1 Clene Earn-out
Shares.
Additionally, in connection
with the forfeiture by the initial shareholders of 750,000 shares at the closing (described in the Section “Reincorporation
Merger” below), the initial shareholders are entitled to receive earn-out shares as follows:
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(i)
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375,000 shares of Purchaser Common Stock (“Milestone 1 Initial Shareholders Earn-out Shares”)
upon satisfaction of the requirements of Milestone 1.
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(ii)
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375,000 shares of Purchaser Common Stock (“Milestone 2 Initial Shareholders Earn-out Shares”)
upon satisfaction of the requirements of Milestone 2.
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If Milestone 1 is not
achieved but Milestone 2 is achieved, the initial shareholders shall receive a catchup payment equal to the Milestone 1 Initial
Shareholders Earn-out Shares.
Furthermore, the parties
agreed that immediately following the closing the Acquisition Merger, Purchaser’s board of directors will consist of at least
five directors, all of whom shall be designated by Clene and a majority of whom shall qualify as independent directors under Nasdaq
rules.
Reincorporation Merger
Immediately prior to
the Acquisition Merger, Tottenham will reincorporate to Delaware by merging with and into the Purchaser. The separate corporate
existence of Tottenham will cease and Purchaser will continue as the surviving corporation. In connection with the Reincorporation
Merger, all outstanding Tottenham’s units will separate into their individual components of ordinary shares (“TOTA
Ordinary Shares”), rights (“TOTA Rights”) and warrants (“TOTA Warrants”) and will
cease separate existence and trading. Upon the consummation of the business combination, the current equity holdings of Tottenham
shareholders shall be exchanged as follows:
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(i)
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Each TOTA Ordinary Share, issued and outstanding immediately prior to the effective time of the
Reincorporation Merger (other than any redeemed shares and Dissenting Shares), will automatically be cancelled and cease to exist
and for each TOTA Ordinary Share, Purchaser shall issue to each Tottenham shareholder (other than the Dissenting Shareholders and
Tottenham shareholders who exercise their redemption rights in connection with the Business Combination) one validly issued share
of Purchaser Common Stock;
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(ii)
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each share held by a dissenting shareholder (who has not effectively withdrawn its right to such
dissent) will be cancelled in exchange for the right to receive payment resulting from the procedure in Section 179 of the BVI
BC Act and such dissenting shareholders will not be entitled to receive any shares of the Purchaser Common Stock to be issued in
connection with the Reincorporation Merger;
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(iii)
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Each TOTA Warrant issued and outstanding immediately prior to effective time of the Reincorporation
Merger will convert into a warrant of Purchaser (“Purchaser Warrant”) to purchase one-half of one share of Purchaser
Common Stock (or equivalent portion thereof). The Purchaser Warrants will have substantially the same terms and conditions as set
forth in the TOTA Warrants; and
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(iv)
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The holders of TOTA Rights issued and outstanding immediately prior to the effective time of the
Reincorporation Merger will receive one-tenth (1/10) of one share of Purchaser Common Stock in exchange for the cancellation of
each TOTA Right; provided, however, that no fractional shares will be issued and all fractional shares will be rounded to the nearest
whole share.
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Additionally, immediately
prior to the exchange listed above, Tottenham shall cancel and forfeit an aggregate of 750,000 TOTA Ordinary Shares owned by the
initial shareholders for no additional consideration.
Representations and Warranties
In the Agreement, Clene
makes certain representations and warranties (with certain exceptions set forth in the disclosure schedule to the Merger Agreement)
relating to, among other things: (a) proper corporate organization of Clene and its subsidiaries and similar corporate matters;
(b) authorization, execution, delivery and enforceability of the Merger Agreement and other transaction documents; (c) absence
of conflicts; (d) capital structure; (e) accuracy of charter documents and corporate records; (f) required consents and approvals;
(g) financial information; (h) absence of certain changes or events; (i) title to assets and properties; (j) material contracts;
(k) ownership of real property; (l) licenses and permits; (m) compliance with laws, including those relating to foreign corrupt
practices and money laundering; (n) ownership of intellectual property; (o) suppliers; (p) employment and labor matters; (q) taxes
matters; (r) regulatory matters; (s) environmental matters; (t) brokers and finders; (u) that Clene is not an investment company;
and (v) other customary representations and warranties..
In the Agreement, the
Purchaser Parties make certain representations and warranties relating to, among other things: (a) proper corporate organization
and similar corporate matters; (b) authorization, execution, delivery and enforceability of the Merger Agreement and other transaction
documents; (c) litigation; (d) brokers and finders; (e) capital structure; (f) validity of share issuance; (g) minimum trust fund
amount; and (h) validity of Nasdaq Stock Market listing; (i) SEC filing requirements and financial statements; (j) material contracts;
and (k) compliance with laws, including those relating to foreign corrupt practices and money laundering.
Conduct Prior to Closing; Covenants
Each of Clene and Tottenhamhas
agreed to, and cause its subsidiaries to, operate the business in the ordinary course, consistent with past practices, prior to
the closing of the transactions (with certain exceptions) and not to take certain specified actions without the prior written consent
of the other party.
The Merger Agreement
also contains covenants providing for:
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Each
party providing access to their books and records and providing information relating to their respective business to the other
party, its legal counsel and other representatives;
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The
Purchaser using commercially reasonable efforts to enter into and consummate subscription agreements with investors relating to
a purchase of shares of Tottenham or Purchaser through a private placement, and/or backstop or redemption waiver arrangements with
potential investors;
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Tottenham’s
exchange of indebtedness owed by it to the Sponsor into TOTA Ordinary Shares; and
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Cooperation
in making certain filings with the SEC.
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Conditions to Closing
General Conditions
Consummation of the
transactions herein is conditioned on, among other things, (i) the absence of any order or provisions of any applicable law making
the transactions illegal or otherwise preventing the transactions; (ii) Tottenham and Clene receiving approval from their respective
shareholders to the transactions, (iii) Tottenham retaining its listing on Nasdaq and the additional listing application for the
closing payment shares issued to Clene’s stockholders being approved by Nasdaq; and (iv) the Escrow Agreement as described
in the Merger Agreement being entered into and in full force and effect.
Clene’s Conditions to Closing
The obligations of
Clene to consummate the transactions contemplated by the Agreement, in addition to the conditions described above, are conditioned
upon each of the following, among other things:
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Purchaser
Parties complying with all of their obligations under the Merger Agreement in all material respects;
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subject
to applicable materiality qualifiers, the representations and warranties of Purchaser Parties being true on and as of the closing
date of the transactions;
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all
debt owed by Tottenham to the Sponsor shall have been converted into TOTA Ordinary Shares;
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the
net amount of fund in the trust account, together with any net proceeds raised in connection with the mergers contemplated in the
Merger Agreement, shall be no less than $30,000,000.
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the
initial shareholders shall have canceled and forfeited, for no additional consideration, 750,000 insider shares;
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its
receipt of an opinion of Kirkland & Ellis LLP providing that the Acquisition Merger will qualify for the reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended;
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Purchaser
Parties complying with the reporting requirements under the applicable Securities Act and Exchange Act; and
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there
having been no material adverse effect to Purchaser Parties.
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Purchaser Parties’ Conditions
to Closing
The obligations of
Purchaser Parties to consummate the transactions contemplated by the Agreement, in addition to the conditions described above in
the first paragraph of this section, are conditioned upon each of the following, among other things:
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Clene and
its subsidiaries complying with all of the obligations under the Agreement in all material respects;
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except as
would reasonably be expected to have a material adverse effect on Clene, the representations and warranties of Clene and its subsidiaries
being true on and as of the closing date of the transactions; and
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there having
been no material adverse effect to Clene’s business
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Termination
The Agreement may be
terminated and/or abandoned at any time prior to the closing by:
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mutual
consent of Clene and the Purchaser Parties;
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either
Tottenham or Clene, if any legal restraint permanently restraining, enjoining or otherwise prohibiting the transactions contemplated
by this Agreement has become final and non-appealable; provided, however, that the right to terminate the Merger Agreement pursuant
to this clause shall not be available to a party if the failure by such party or its affiliates to comply with any provision of
the Merger Agreement is the principal cause of the legal restraint or the failure of the legal restraint to be lifted;
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either
Tottenham or Clene, if the closing has not occurred by the earlier of (i) the Deadline (as defined in the memorandum and articles
of association of Tottenham (as amended) and as extended from time to time in accordance therewith) and (ii) February 6, 2021 (“Outside
Closing Date”), provided that no material breach of this Agreement by the party seeking to terminate this Agreement shall
have occurred or have been made;
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Tottenham,
if Clene has materially breached any representation, warranty, agreement or covenant contained in the Merger Agreement and such
breach (A) would result in the failure to satisfy certain conditions to closing and (B) is incapable of being cured by the Outside
Closing Date, or if capable of being cured by the Outside Closing Date, shall not be cured within fifteen (15) days following the
receipt by Clene of a notice describing such breach; or
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Clene,
if Tottenham has materially breached any representation, warranty, agreement or covenant contained in the Merger Agreement and
such breach (A) would result in the failure to satisfy certain conditions to closing and (B) is incapable of being cured by the
Outside Closing Date, or if capable of being cured by the Outside Closing Date, shall not be cured within fifteen (15) days following
the receipt by Tottenham a notice describing such breach; and
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either
Tottenham or Clene, if this Agreement or the transactions contemplated hereby fail to be authorized or approved by either the Clene
or Tottenham shareholders.
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Indemnification
Until the six (6) months
anniversary from and after the closing date, the Clene’s stockholders will indemnify the Purchaser, solely from the Escrow
Shares, for any losses incurred or sustained by the Purchaser arising from any breach, inaccuracy or nonfulfillment of any of the
representations, warranties and covenants of Clene contained herein. The indemnification applies only to amounts (in aggregate)
in excess of $1,000,000, and the indemnification obligations are capped at the value of the Escrow Shares. Such indemnification
can only be satisfied with the cancellation of shares of Purchaser Common Stock.
The foregoing summary
of the Agreement does not purport to be complete and is qualified in its entirety by reference to the actual agreement, which is
filed as Exhibit 2.1 hereto.
In addition to the
Agreement, the following agreements have been entered into in connection with the closing of the business combination.
Shareholder Support Agreements
Concurrently with
signing the Merger Agreement, Tottenham entered into the Shareholder Support Agreements respectively with two Clene’s
stockholders, which collectively own 34.2% of total Clene outstanding shares. Such stockholders agree to vote in favor of the
business combination pursuant to a consent solicitation or at Clene’s stockholders meeting, subject to the terms of
such shareholder support agreements.
Initial Shareholders Forfeiture Agreements
Concurrently with signing
the Merger Agreement, Tottenham, Clene and the initial shareholders entered into an Initial Shareholders Forfeiture Agreement whereby
Tottenham and the initial shareholders will cancel and forfeit an aggregate of 750,000 insider shares of Tottenham owned by the
initial shareholders for no additional consideration before the closing of the business combination, and that Tottenham will exchange
the Sponsor’s loans to Tottenham into a number of TOTA Ordinary Shares equal to the aggregate amount of the such loans divided
by $10.
In addition to the
Agreement, the following agreements will be entered into in connection with the closing of the business combination
Registration Rights Agreement
In connection with
the transactions, Purchaser and certain Clene’s stockholders are expected to enter into a Registration Rights Agreement to
provide for the registration of the shares of common stock being issued to the Clene’s stockholders in connection with the
transactions. Certain Clene’s stockholders will be entitled to (i) make a written demand for registration under the Securities
Act of all or part of the their closing payment shares (up to a maximum of two demands in total), and (ii)“piggy-back”
registration rights with respect to registration statements filed following the consummation of the Acquisition. Clene will bear
the expenses incurred in connection with the filing of any such registration statements.
Lock-Up Agreements
In connection with
the transactions, Purchaser is expected to enter into Lock-Up Agreements with certain Clene stockholders with respect to certain
lock-up arrangements, which will provide that such Clene stockholder will not, within certain period of time from the closing of
the Business Combination and subject to certain exceptions, offer, sell, contract to sell, pledge or otherwise dispose of, directly
or indirectly, any of the ordinary shares issued in connection with the Acquisition Merger, enter into a transaction that would
have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic
consequences of ownership of such shares, whether any of these transactions are to be settled by delivery of any such shares, in
cash, or otherwise.