Item 1.01
Entry into a Material Definitive Agreement.
SusGlobal Energy Corp. (the
“Company”) entered into securities purchase agreements (the “SPAs”) with two
investors (the “Investors”) pursuant to which each Investor purchased two 12%
unsecured convertible promissory notes comprised of the first notes (the “First
Notes”) being in the amount of $275,000 each, and the remaining notes in the
amount of $275,000 each (the “Back-End Notes,” and, together with the First
Notes, the “Notes”) in the aggregate principal amount of $1,100,000, such
principal and the interest thereon convertible into shares of the Company’s
common stock (the “Common Stock”) at the Investors’ option. Each
First Note contained
a $25,000 OID such that the purchase price of each First Note was $250,000. The First
Notes were paid for by the Investors upon the signing of the SPAs. The Back-End
Notes were initially paid for by the issuance of two offsetting $250,000 secured
notes issued to the Company by the Investors (the “Investor Notes”), provided
that prior to conversion of the Investor Notes, the Investors must have paid
back the Investor Notes in cash.
Although the SPAs are dated March
7, 2019 or March 8, 2019 (each, an “Effective Date”), they became effective upon
the payment in cash of the purchase price by the Investors. The purchase prices
of $250,000 and $250,000 for the First Notes was paid in cash by the Investors
on March 11, 2019. After payment of transaction-related expenses, net proceeds
to the Company from the Notes totaled $456,000.
The maturity dates of the Notes
are March 7, 2020 or March 8, 2020. The Notes shall bear interest at a rate of
twelve percent (12%) per annum (the “Interest Rate”), which interest shall be
paid by the Company to the Investors in Common Stock at any time the Investors
send a notice of conversion to the Company. The Investors are entitled to, at
their option, convert all or any amount of the principal face amount and any
accrued but unpaid interest of the Notes into Common Stock, at any time, at a
conversion price for each share of Common Stock equal to 65% multiplied by the
lowest trading price (as defined in the Notes) of the Common Stock as reported
on the National Quotations Bureau OTC Marketplace exchange upon which the
Company’s shares are traded during the twenty (20) consecutive Trading Day
period immediately preceding (i) the applicable Effective Date; or (ii) the
conversion date (the “Variable Conversion Price”).
The Notes may be prepaid until
180 days from the applicable Effective Date with the following penalties: (i) if
the Notes are prepaid within sixty (60) days following the applicable Effective
Date, then the prepayment premium shall be 125% of the face amount plus any
accrued interest; (ii) if the Notes are prepaid during the period beginning on
the date which is sixty-one (61) days following the applicable Effective Date,
and ending on the date which is ninety (90) days following the applicable
Effective Date, then the prepayment premium shall be 135% of the face amount
plus any accrued interest; (iii) if the Notes are prepaid during the period
beginning on the date which is ninety-one (91) days following the
applicable Effective Date, and ending on the date which is one hundred eighty
(180) days following the applicable Effective Date, then the prepayment premium
shall be 145% of the face amount plus any accrued interest. Such prepayment
redemptions must be closed and funded within three days of giving notice of
prepayment or the right to prepay shall be forfeited.
The Company shall at all times
reserve a minimum of eight (8) times the number of its authorized and unissued
Common Stock (the “Reserved Amounts”), free from preemptive rights, to provide
for the issuance of Common Stock upon the full conversion of the Notes. Upon
full conversion of the Notes, any shares remaining in such reserve shall be
cancelled. The Company will, from time to time, increase the Reserved Amount in
accordance with the Company’s obligations under the Notes.
Pursuant to the terms of the
SPAs, for so long as the Investors owns any shares of Common Stock issued upon
the conversion of the Notes (the “Conversion Shares”), the Company covenants to
secure and maintain the listing of such shares of Common Stock. The Company is
also subject to certain customary negative covenants under the Notes and the
SPAs, including but not limited to the requirement to maintain its corporate
existence and assets, subject to certain exceptions, and not to make any offers
or sales of any security under circumstances that would require registration of
or stockholder approval for the Notes or the Conversion Shares.
Any shares to be issued pursuant
to any conversion of the Notes shall be issued pursuant to an exemption from the
registration requirement of the Securities Act of 1933, as amended (the
“Securities Act”) provided in Section 4(a)(2) of the Securities Act.
The Company intends to use the
proceeds from the Notes for general working capital purposes.
The Notes are long-term debt
obligations that are material to the Company. The Notes contain certain
representations, warranties, covenants and events of default including if the
Company is delinquent in its periodic report filings with the Securities and
Exchange Commission and increases in the amount of the principal and interest
rates under the Notes in the event of such defaults. In the event of default, at
the option of the Investors and in the Investors’ sole discretion, the Investors
may consider the Notes immediately due and payable.
The foregoing descriptions of the
SPAs, the Notes, and the Investor Notes do not purport to be complete and are
qualified in their entirety by reference to the SPAs, the First Notes, the
Back-End Notes, and the Investor Notes the forms of which are filed as,
respectively, Exhibits 4.1, 4.2, 4.3, and 10.1 hereto.