Item 1.01 Entry into a Material Definitive
Agreement.
Arena Investors Financing
On
December 17, 2021, Charge Enterprises, Inc. (sometimes referred to
herein as “we,” “us,” “our” or
similar terms) entered into a Securities Purchase Agreement (the
“Purchase
Agreement”) with funds affiliated with Arena Investors
LP (the “Arena
Investors”) pursuant to which we issued original issue
discount, senior secured, non-convertible promissory notes in the
aggregate principal amount of $14,814,814 (the “December 2021 Notes”) and
$7,407,407 aggregate stated value of our newly-designated Series C
Convertible Preferred Stock, par value $0.0001 per share (the
“Series C
Preferred”). In connection with the issuance of the
December 2021 Notes, we issued to the Arena Investors warrants (the
“December 2021
Warrants”) to purchase an aggregate of 2,370,370
shares of our Common Stock, $0.0001 par value per share (our
“Common
Stock”).
The
securities sold pursuant to the Purchase Agreement are issued in
reliance on an exemption from registration under Section 4(a)(2)
the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b)
of Regulation D promulgated thereunder.
The
following description of the Purchase Agreement, the December 2021
Notes, the Series C Preferred, and the December 2021 Warrants, and
the transactions contemplated thereby are qualified in their
entirety by reference to the Purchase Agreement, the Form of
December 2021 Note, the Certificate of Designation (as defined
herein) of the Series C Preferred, the Form of December 2021
Warrants, the Amended and Restated Security Agreement, dated as of
December 17, 2021 (the “Security Agreement”), the
Guaranty Agreement (the “Guaranty”) dated as of December
17, 2021, and the Registration Rights Agreement (the
“Registration Rights
Agreement”) dated December 17, 2021 (collectively, the
“Transaction
Documents”), copies of which are filed as Exhibits to
this Current Report on Form 8-K.
The
representations, warranties and covenants contained in the
Transaction Documents were made only for purposes of such
agreements and as of specific dates, were solely for the benefit of
the parties to the Transaction Documents, and may be subject to
limitations agreed upon by the contracting parties. Accordingly,
the Transaction Documents are incorporated herein by reference only
to provide information regarding the terms of the Transaction
Documents, and not to provide any other factual information
regarding us or our business, and should be read in conjunction
with the disclosures in our periodic reports and other filings with
the SEC.
The Purchase Agreement
On
December 17, 2021, we entered into the Purchase Agreement to raise
aggregate gross proceeds of $20,000,000 from the Arena Investors
to, in part, fund the anticipated acquisitions by us of BW
Electrical Services LLC (the “BW Acquisition”) and EV Holdings
Group, LLC and affiliates (the “EV Acquisition”). Without the
consent of the Arena Investors, we are required to consummate the
BW Acquisition and EV Acquisition not later than January 17,
2022.
The December 2021 Notes
On
December 17, 2021, the Arena Investors purchased aggregate
principal amount of $14,814,814 December 2021 Notes, for an
aggregate purchase price of the December 2021 Notes of
$133,333,184. The December 2021 Notes are due November 19, 2023. We
are obligated to pay interest to the holders on the outstanding
principal amount at the rate of 7.5% per annum, subject to increase
to 20% per annum upon and during the occurrence of an event of
default. At any time before maturity, as long as no event of
default has occurred, we may redeem each December 2021 Note at the
price of 107.5% of the then outstanding principal amount of the
Note plus accrued but unpaid interest. Upon an event of default, at
the holder’s option, all outstanding principal, accrued but
unpaid interest and other amounts described in the December 2021
Note, shall become immediately due and payable by us.
The Series C Preferred
A
Certificate of Designation of Preferences, Rights and Limitations
(the “Certificate of
Designation”), designating 2,370,370 shares of our
Series C Preferred setting forth the terms of the Series C
Preferred created thereby, were filed with the Secretary of State
of the State of Delaware on December 17, 2021. There has been no
increase in the authorized shares of our capital stock effected by
the Certificate of Designation.
The
following is a summary of the material terms of the Certificate of
Designation and the Series C Preferred:
Liquidation Preference
In the
event of any liquidation, dissolution or winding up of our affairs,
holders of the Series C Preferred will be entitled to receive a
liquidation distribution (the “Liquidation Preference”), per
share equal to $3.125 per share (the “Stated Value”), plus all accrued
but unpaid dividends. The Liquidation Preference is senior in
liquidation rights to the holders of our Common Stock.
Dividends
Holders
of our Series C Preferred will receive a monthly dividend at a
fixed annual rate of 6.00% of the Liquidation Preference, or
$0.1875 per share of Series C Preferred per year, payable, at our
option, in cash or in shares of our Common Stock valued at the
conversion price (as described herein).
Voting
Except
as otherwise provided in our Amended and Restated Certificate of
Incorporation, the Certificate of Designation or as otherwise
required by law, holders of the Series C Preferred shall have no
voting rights, however, we shall not, without the affirmative vote
of the holders of all the then outstanding shares of Series C
Preferred:
●
alter or change
adversely the powers, preferences or rights given to the Series C
Preferred or alter or amend the Certificate of
Designation,
●
amend our
Certificate of Incorporation or other charter documents in any
manner that materially adversely affects any rights of any holder,
or
●
enter into any
agreement with respect to any of the foregoing.
Optional Conversion
Each
share of Series C Preferred is convertible, at the option of the
holder, into such number of shares of our Common Stock equal to the
Stated Value divided by the conversion price of $3.125 per share.
Therefore, each share of Series C Preferred is convertible into one
share of Common Stock (subject to adjustment as provided in the
Certificate of Designation). The holder may convert Series C
Preferred at any time after the shares issuable upon conversion
satisfy the holding period under Rule 144. The holder is prohibited
from converting the Series C Preferred into shares of Common Stock
if, as a result of such conversion, the holder, together with its
affiliates, would own more than 9.99% of the total number of shares
of our Common Stock then issued and outstanding, (the
“Beneficial Ownership
Limitation”). The holder may reset the Beneficial
Ownership Limitation to a higher or lower number upon providing
written notice to us. Such notice will be effective 61 days after
delivery to us.
Forced Conversion
If the
closing price of the Common Stock exceeds $3.125 (subject to
adjustment), we may, on ten trading days’ notice, cause each
holder to convert all or part of such holder’s Series C
Preferred plus all accrued but unpaid dividends.
Optional Redemption
On ten
trading days’ notice to the holders, we may redeem the Series
C Preferred in whole or, from time to time, in part at our option,
at the sum of $3.125 per share of Series C Preferred (subject to
adjustment), plus accrued but unpaid dividends. Holders may elect
to convert the Series C Preferred during such notice
period.
Mandatory Conversion
On
December 17, 2024, we shall, subject to ten days’ prior
notice from a holder, convert all of the then outstanding Series C
Preferred into our Common Stock, or at our option redeem such
Series C Preferred for cash, in the aggregate redemption amount of
$3.125 per share of Series C Preferred (subject to adjustment),
plus accrued but unpaid dividends, plus additional cash
consideration in order for the holder to achieve a 20% IRR. If we
elect to convert the Series C Preferred, the conversion price is
based on the lower of the conversion price then in effect or the
volume weighted average price of our Common Stock for the prior
44-day trading period.
The December 2021 Warrants
Pursuant
to the Purchase Agreement, we issued to the Arena Investors the
December 2021 Warrants to purchase an aggregate of 2,370,370 shares
of our Common Stock. Each December 2021 Warrant is exercisable
until November 19, 2023 at an exercise price of $4.00 per share of
Common Stock, subject to certain beneficial ownership
limitations (with a maximum ownership limit of 9.99%). The
exercise price is also subject to adjustment due to certain events,
including stock dividends, stock splits and in connection with the
issuance by us of our Common Stock or Common Stock
equivalents at an effective price per share lower than the exercise
price then in effect. The holders may exercise the December 2021
Warrants on a cashless basis if the shares of our Common Stock
underlying the December 2021 Warrants are not then registered
pursuant to an effective Securities Act registration
statement.
The Registration Rights Agreement
The
Registration Rights Agreement was executed in connection with the
issuance of the Series C Preferred and the December 2021 Warrants
requiring us to cause to be declared effective by the SEC a resale
Securities Act registration statement for the offer and resale of
the Common stock underlying the Series C Preferred and the December
2021 Warrants. If we fail to have it declared effective by the SEC
by June 17, 2022, or if we fail to maintain the effectiveness of
the registration statement until all of such shares of Common Stock
have been sold or are otherwise able to be sold pursuant to Rule
144 under the Securities Act, without any volume or manner of sale
restrictions, then we will be obligated to pay to the Arena
Investors liquidated damages, in addition to any other rights the
holders may have, upon the occurrence of any such event and on each
monthly anniversary of thereafter until the event is cured, an
amount in cash equal to $75,000.
The Guaranty
The
Guaranty provides that certain of our subsidiaries, Transworld
Enterprises Inc., Charge Infrastructure, Inc., Getcharged, Inc.,
Charge Services, LLC, Charge Communications Inc., and PTGI
International Carrier Services, Inc. (collectively, the
“Subsidiary
Guarantors”), guaranteed certain of our obligations
under the Transaction Documents.
The Security Agreement
The
Security Agreement provides that our obligations under the
Transaction Documents are secured by a security interest in
substantially all of our assets and the Subsidiary Guarantors. As a
result, if we default in our obligations under the Transaction
Documents, the holders of the December 2021 Notes could foreclose
on their security interests and liquidate some or all of these
assets.