Item 1.01. Entry into a Material Definitive Agreement.
Forward Purchase Agreement
On November 20, 2022, PTIC II and Vellar Opportunity Fund SPV LLC - Series 9
(the "Seller"), entered into an agreement (the "Forward Purchase Agreement") for
an OTC Equity Prepaid Forward Transaction (the "Forward Purchase Transaction").
Pursuant to the terms of the Forward Purchase Agreement, Seller intends, but is
not obligated, to purchase in the open market through a broker shares of PTIC II
Class A common stock, par value $0.0001 per share ("Class A Common Stock" or the
"Shares"), after the date of the Forward Purchase Agreement and after the
expiration of PTIC II's redemption deadline from holders of Shares (other than
PTIC II or affiliates of PTIC II) who have elected to redeem Shares (such
holders, "Redeeming Holders") pursuant to the redemption rights set forth in
PTIC II's amended and restated certificate of incorporation, dated as of
December 3, 2020, in connection with that certain business combination
agreement, dated as of May 17, 2022 (as the same has been and may be amended,
supplemented or otherwise modified from time to time, the "Business Combination
Agreement" and the transactions contemplated thereby, the "Business
Combination") between PTIC II, RW National Holdings, LLC, a Delaware limited
liability company ("Renters Warehouse") and Lake Street Landlords, LLC, a
Delaware limited liability company, up to a maximum of 9,000,000 Shares at a
redemption price of approximately $10.08 per Share (based on an amount of
$231,870,089.06 currently held in the Trust Account) to be paid to investors who
elected to redeem their shares at PTIC II's redemption deadline (the "Initial
Price"); provided that Seller may not beneficially own greater than 9.9% of the
issued and outstanding Shares on a post-Business Combination pro forma basis.
Seller has agreed to waive any redemption rights with respect to any Shares in
connection with the Business Combination. Such waiver may reduce the number of
Shares redeemed in connection with the Business Combination, which reduction
could alter the perception of the potential strength of the Business
Combination. The number of Shares purchased by the Seller shall be referred to
as the "Recycled Shares."
The Forward Purchase Agreement provides that not later than one local business
day following the closing (the "Prepayment Date" and the "Closing,"
respectively) of the Business Combination, PTIC II will pay to Seller, out of
funds held in the Trust Account, a cash amount (the "Prepayment Amount") equal
to (x) the product of the number of Recycled Shares and the Initial Price, less,
on the Prepayment Date, (y) one-half of the product of 10% of the number of
Recycled Shares and the Initial Price (the "Leakage Amount"), which remaining
one-half of the Leakage Amount shall be paid by the Seller to the Combined
Company on the earlier to occur of (a) the date that the SEC declares a
registration statement registering the resale of all shares held by the Seller
and its affiliates effective, and (b) the OET Date (as defined in the Forward
Purchase Agreement).. In addition to the Prepayment Amount, PTIC II shall pay
directly from the Trust Account on the Prepayment Date, an amount equal to the
product of 500,000 and the redemption price (the "Additional Consideration"),
for the purpose of repayment of Seller having actually purchased from third
parties prior to the Closing. The Additional Consideration shall be free and
clear of all obligations of Seller in connection with signing a definitive
agreement for the Forward Purchase Transaction. Seller has agreed to waive any
redemption rights with respect to the Shares.
From time to time following the Closing and prior to the earliest to occur of
(a) the third anniversary of the Closing and (b) the date specified by Seller in
a written notice to be delivered to PTIC II at Seller's discretion after the
occurrence of any of a (x) Trigger Event or (y) Delisting Event (as defined in
the Forward Purchase Agreement) (in each case, the "Maturity Date"), Seller may,
in its sole discretion, sell some or all of the Shares. On the last trading day
of each calendar month following the Business Combination, solely from any
proceeds from any sales of Shares by Seller that are not retained for its
account to repay the Leakage Amount, Seller will pay to the Combined Company the
product of the number of Shares sold multiplied by the Reset Price. The "Reset
Price" shall be, on the first scheduled trading day of each month commencing on
the first calendar month following the Closing, the lowest of (a) the
then-current Reset Price, (b) the Initial Price and (c) the VWAP Price of the
Shares of the last ten (10) trading days of the prior calendar month, but not
lower than $5.00; provided that to the extent that PTIC II or the Combined
Company offers and sells any Shares or securities convertible into Shares at a
price lower than the Initial Price, the Reset Price, shall be modified to equal
such reduced price at which such securities may be issued. Seller will retain
any sale proceeds in excess of the product of the number of Shares sold by
Seller and the Reset Price.
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In the event that the VWAP Price of the Class A Common Stock falls below $2.00
per share for 20 trading days during any 30 trading day period (a "Trigger
Event"), then Seller may elect to accelerate the Maturity Date to the date of
such Trigger Event. At the Maturity Date, the Combined Company is required to
purchase from Seller, subject to Seller's consent, all of the unsold Shares for
consideration equal to an amount, in cash or Shares at the sole discretion of
Combined Company (the "Maturity Consideration"), equal to (a) in the case of
cash, the product of the unsold Shares and $1.75, or $2.00, solely in the event
of a Registration Failure (as defined in the Forward Purchase Agreement), and
(b) in the case of Shares, such number of Shares (the "Maturity Shares") with a
value equal to the product of the unsold Shares and $1.75, or $2.00, solely in
the event of a Registration Failure, divided by the VWAP Price of the Shares for
the 30 trading days prior to the Maturity Date; provided that the Maturity
Shares used to pay the Maturity Consideration are freely tradable. If the
Maturity Shares are not freely tradable, Seller shall instead receive such
number of Shares equal to the product of (i) three (3) and (ii) 9,000,000 minus
the Terminated Shares (as defined in the Forward Purchase Agreement) (the
"Penalty Shares"); provided, however, that if the Penalty Shares are freely
tradable within 120 days after the Maturity Date, Seller shall return to
Appreciate such number of Penalty Shares that are valued in excess of Maturity
Consideration based on the 10-day VWAP ending on the date that such Shares
satisfied the Share Conditions.
In addition, pursuant to the terms and conditions of the Forward Purchase
Agreement, Renters Warehouse and the Combined Company agree, from and after
November 20, 2022, not to incur in excess of $25.0 million of indebtedness
through and including the 90th day following the Prepayment Date without the
prior written consent of the Seller.
A break-up fee equal to (i) all of Seller's reasonable and documented fees and
expenses relating to the Forward Purchase Agreement capped at $50,000 plus (ii)
$500,000, shall be payable by the Combined Company to Seller in the event the
Forward Purchase Agreement is terminated by PTIC II (collectively, the "Break-up
Fee"). However, the Break-up Fee is not payable if the Business Combination
Agreement is terminated prior to the closing of such Business Combination.
The description of the Forward Purchase Agreement does not purport to be
complete and is qualified in its entirety by the terms and conditions thereof, a
copy of which is attached hereto as Exhibit 10.1 and incorporated herein by
reference.
Forward-Looking Statements
Certain statements in this Current Report on Form 8-K may be considered
forward-looking statements. Forward-looking statements generally relate to
future events or PTIC II's or Renters Warehouse's future financial or operating
performance, and other "forward-looking statements" (as such term is defined in
the Private Securities Litigation Reform Act of 1995), which include statements
relating to the Business Combination. In some cases, you can identify
forward-looking statements by terminology such as "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend," "expect," "should," "would,"
"plan," "predict," "potential," "seem," "seek," "future," "outlook," or the
negatives of these terms or similar expressions that predict or indicate future
events or trends or that are not statements of historical matters. These
forward-looking statements are subject to a number of risks and uncertainties,
including the inability of the parties to successfully or timely complete the
Business Combination. If any of these risks materialize or our assumptions prove
incorrect, actual results could differ materially from the results implied by
these forward-looking statements.
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These forward-looking statements are based upon estimates and assumptions that,
while considered reasonable by PTIC II and its management, and/or Renters
Warehouse and its management, as the case may be, are inherently uncertain.
Factors that may cause actual results to differ materially from current
expectations include, but are not limited to: (1) the occurrence of any event,
change or other circumstances that could give rise to the termination of the
Business Combination Agreement; (2) the outcome of any legal proceedings that
may be instituted against PTIC II, Renters Warehouse, the combined company
following the Business Combination or others following the announcement of the
transactions related to the Business Combination including the Business
Combination Agreement; (3) the inability to complete the transactions
contemplated by the Business Combination Agreement due to the failure to obtain
financing necessary to complete the transactions contemplated by the Business
Combination Agreement, or to satisfy other conditions to closing; (4) the
failure of any condition precedent to the committed equity facility in
connection with the common stock purchase agreement by and between PTIC II and
CF Principal Investments LLC, which could cause the termination of such
facility; (5) changes to the proposed structure of the transactions contemplated
by the Business Combination Agreement that may be required or appropriate as a
result of applicable laws or regulations or as a condition to obtaining
regulatory approval of the transactions contemplated by the Business Combination
Agreement; (6) the ability to meet stock exchange listing standards at or
following the consummation of the transactions contemplated by the Business
Combination Agreement; (7) the risk that the transactions contemplated by the
Business Combination Agreement disrupt current plans and operations of Renters
Warehouse or PTIC II as a result of the announcement and consummation of the
Business Combination Agreement and the transactions contemplated thereby; (8)
the ability to recognize the anticipated benefits of the transactions
contemplated by the Business Combination Agreement, which may be affected by,
among other things, competition, the ability of the combined company to grow and
manage growth profitably, maintain relationships with customers and suppliers
and retain its management and key employees; (9) costs related to the
transactions contemplated by the Business Combination Agreement; (10) changes in
applicable laws or regulations; (11) the possibility that Renters Warehouse or
the combined company following the Business Combination may be adversely
affected by other economic, business, and/or competitive factors; (12) Renters
Warehouse's estimates of expenses and profitability; (13) the failure to realize
anticipated pro forma results or projections and underlying assumptions,
including with respect to estimated stockholder redemptions, purchase price, and
other adjustments; (14) debt defaults, and the need for or failure to obtain
additional capital; and (15) other risks and uncertainties set forth in the
sections entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking
Statements" in PTIC II's Annual Report on Form 10-K for the year ended December
31, 2021, Quarterly Reports on Form 10-Q for the quarters ended March 31, 2022,
June 30, 2022 and September 30, 2022, the Proxy Statement, and in any subsequent
filings with the SEC. There may be additional risks that neither PTIC II nor
Renters Warehouse presently know or that PTIC II and Renters Warehouse currently
believe are immaterial that could also cause actual results to differ from those
contained in the forward-looking statements.
Nothing in this Current Report on Form 8-K should be regarded as a
representation by any person that the forward-looking statements set forth
herein will be achieved or that any of the contemplated results of such
forward-looking statements will be achieved. You should not place undue reliance
on forward-looking statements, which speak only as of the date they are made.
Neither PTIC II nor Renters Warehouse undertakes any duty, and each of PTIC II
and Renters Warehouse expressly disclaims any obligation, to update or alter
this Current Report on Form 8-K or any projections or forward-looking
statements, whether as a result of new information, future events or otherwise.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
10.1 Forward Purchase Agreement, dated November 20, 2022, by and between
Vellar Opportunity Fund and PropTech Investment Corporation II.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
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