Item 1.01. Entry Into a Material Definitive Agreement.
Convertible Note and Warrant
On June 14, 2023, PARTS iD, Inc., a Delaware corporation
(the “Company”), entered into a Note and Warrant Purchase Agreement (the “Purchase Agreement”) whereby the Company
agreed to issue and sell to an investor (the “Purchaser”), in a private placement, (i) an unsecured convertible promissory
note (the “Convertible Note”) in the aggregate principal amount of $250,000 and (ii) a warrant to purchase an aggregate of
694,444 shares of the Company’s Class A common stock (the “Common Stock”), at an exercise price of $0.36 per share (the
“Warrant”).
The Convertible Note accrues interest at 7.75%
per annum, compounded semi-annually. The Convertible Note matures on June 14, 2025 (the “Maturity Date”). Effective on the
Maturity Date, if the Convertible Notes has not otherwise been repaid by the Company in accordance with the terms and conditions set forth
therein, then at the option of the Purchaser, the outstanding balance of the Convertible Note (including any accrued but unpaid interest
thereon) (the “Note Amount”) shall convert into that number of fully paid and nonassessable shares of the Company’s
Common Stock at a conversion price equal to the respective Note Amount (as defined in the Convertible Note) divided by the Conversion
Price (as defined in the Convertible Note). The Company may prepay the Note Amount at any time prior to the Maturity Date.
The Convertible Note is strictly subordinated to
the (i) senior secured indebtedness incurred or owed by the Company pursuant to that certain Loan and Security Agreement, dated as of
October 21, 2022, by and among the Company, its subsidiary PARTS iD, LLC, a Delaware limited liability company and JGB Collateral, LLC,
a Delaware limited liability company, in its capacity as collateral agent and the several financial institutions or entities that from
time to time become parties thereto, as amended by that certain Amendment to Loan and Security Agreement, dated as of February 22, 2023
(the “Loan Agreement”); and (ii) Permitted Litigation Indebtedness (as defined in the Loan Agreement).
The Warrant will expire after 5 years from the
date of issuance and may not be exercised on a cashless basis. The Warrant provides that the holder will not have the right to exercise
any portion of the Warrant, if the holder, together with its affiliates, and any other party whose holdings would be aggregated with those
of the holder for purposes of Section 13(d) or Section 16 of the Exchange Act would beneficially own in excess of 4.99%, of the number
of shares of the Company’s Common Stock outstanding immediately after giving effect to such exercise (the “Beneficial Ownership
Limitation”); provided, however, that the holder may increase or decrease the Beneficial Ownership Limitation by giving notice to
the Company, with any such increase not taking effect until the sixty-first day after such notice is delivered to the Company but not
to any percentage in excess of 9.99%; provided that the holder of the Warrant that beneficially owns in excess of 19.99% of the number
of shares of the Common Stock outstanding on the issuance date of the Warrant shall not be subject to the Beneficial Ownership Limitation.
The foregoing description is only a summary of
the terms of the Purchase Agreement, Convertible Note and Warrant and it is qualified in its entirety by reference to the full text of
the Purchase Agreement, Convertible Note and Warrant, copies of which are filed hereto as Exhibits 10.1, 10.2 and 10.3, respectively,
and incorporated herein by reference.
The Company intends to use the proceeds from the
issuance of the Convertible Note and the Warrant for working capital purposes and the repayment of current indebtedness.
The Convertible Note and the Warrant were issued
by the Company in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the
“Securities Act”), and have not been registered under the Securities Act.
JGB Loan Amendment
On June 16, 2023, the Company entered into a Second
Amendment to Loan and Security Agreement with the Agent (as defined below), which amends that certain Loan and Security Agreement, dated
as of October 21, 2022, and as amended by that Amendment to Loan and Security Agreement, dated as of February 22, 2023 (collectively,
the “Loan Agreement”), by and among the Company, the Lenders party thereto and JGB Collateral, LLC, in its capacity as collateral
agent for the Lenders (the “Agent”).
The Second Amendment provides the Company with
the ability to borrow an additional $700,000 (the “Loan”) with an original discount on such additional Loan of $100,000. In
accordance with the terms of the Second Amendment, the Company shall repay the Loan in equal weekly installments of $50,000 commencing
on July 7, 2023; provided, however, that in the event the Company receives gross proceeds of at least $2,000,000 from any debt or equity
financing following the effective date of the Second Amendment, then the Company shall repay the Loan in an amount equal to $950,000.
Notwithstanding the terms and conditions set forth in the Second Amendment, the Loan Agreement, the other Loan Documents (as defined in
the Loan Agreement) and the rights and obligations of each party thereto, all remain in full force and effect.
The foregoing description of the Second Amendment
thereby is not complete and is subject to, and qualified in its entirety by reference to, the full text of the Second Amendment, which
is included as Exhibit 10.4 hereto and is incorporated herein by reference.
