Form of Penny Warrant
Exhibit 10.4
THE OFFER AND SALE OF THE SECURITIES (INCLUDING THE SHARES OF COMMON STOCK THAT MAY BE PURCHASED HEREUNDER) REPRESENTED BY THIS WARRANT (1) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN JURISDICTION, (2) MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE AND FOREIGN SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS AND (3) ARE SUBJECT TO ADDITIONAL LIMITATIONS ON TRANSFER SPECIFIED IN THE INVESTMENT AGREEMENT, DATED AS OF MARCH 26, 2024, BETWEEN THE ONE GROUP HOSPITALITY, INC. AND THE HOLDERS PARTY THERETO, AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME.
Original Issue Date: [●], 2024
WARRANT CERTIFICATE NO. A - [●]
The ONE Group Hospitality, Inc.
Warrant to Purchase Shares of Common Stock
The ONE Group Hospitality, Inc., a Delaware corporation (the “Company”), for value received, hereby certifies that [●] (the “Holder”), subject to the terms and conditions hereof, shall be entitled to purchase from the Company, at any time and from time on or prior to the close of business on [●], 20341 (the “Expiration Date”), [__]2 shares of Common Stock (individually, a “Warrant Share” and collectively, the “Warrant Shares”) of the Company, at a price per share equal to the Exercise Price. The number of Warrant Shares are subject to adjustment as provided herein, and all references to “shares of Common Stock” and “Exercise Price” herein shall be deemed to include any such adjustment or series of adjustments.
1 To be the date which is ten years after the Original Issue Date.
2 Warrants of Hill Path Investor and HPS Investor (each as defined in the Investment Agreement) to be documented in separate warrant certificates exercisable for a number of warrants to represent (i) 5.0% for Hill Path Investor and (ii) 0.33% for HPS Investor, for an aggregate amount of 5.33%, in each case of the fully diluted shares of common stock on the Closing Date. For this purpose, fully diluted shares of common stock means: (a) the number of all outstanding shares of common stock (excluding any held by the Company in treasury), plus (b) the number of all outstanding stock options (both vested and unvested), plus (c) the number of all outstanding unvested RSUs and PSUs, plus (d) the number of shares issuable under the Penny Warrants (as defined in the Investment Agreement). This calculation does not include, for confirmation, shares reserved but not issued and outstanding under the Company 2019 Equity Incentive Plan. For an illustration, if this calculation were completed using the outstanding shares of Common Stock (as of February 29, 2024) and outstanding stock options (both vested and unvested) and unvested RSUs and PSUs of the Company (in each case as of December 31, 2023), in each case as specified in the Company’s Form 10-K filed on March 14, 2024, then 1,762,865 and 117,524 shares of Common Stock would be issuable under the Penny Warrants issued to the Hill Path Investor and HPS Investor, respectively. This calculation will be updated as of immediately prior to closing under the same methodology.
“Additional Warrants” means additional warrants of the Company issued pursuant to the Investment Agreement and any other warrants the Company may issue from time to time.
“Adjustment Event” has the meaning set forth in Section 6.11.
“Below Fair Market Value Issuance” has the meaning set forth in Section 6.3.
“Board” means the board of directors of the Company or committee of such board or any other governing body of any Subsidiary of the Company, in each case, duly authorized to act with the authority of such board.
“Business Combination” means a merger, consolidation, statutory share exchange, reorganization, recapitalization or similar extraordinary transaction (which may include a reclassification) involving the Company.
“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in the State of New York are authorized or required by law or executive order to close or be closed.
“Cash Exercise” has the meaning set forth in Section 2.2(a).
“Cashless Exercise” has the meaning set forth in Section 2.2(b).
“Closing Date” has the meaning specified under the Investment Agreement.
“Common Stock” means the common stock, par value $0.0001 per share, of the Company.
“Company” has the meaning set forth in the introductory paragraph of this Warrant.
“Company 2019 Equity Incentive Plan” means The One Group Hospitality, Inc. 2019 Equity Incentive Plan, as amended from time to time.
“Determination Date” has the meaning set forth in Section 6.11.
“Distribution” has the meaning set forth in Section 6.2.
“Equity Securities” means, with respect to any Person, any (a) membership interests, units or shares of capital stock, (b) equity, ownership, voting, profit or participation interests or (c) similar rights or securities in such Person or any of its subsidiaries, or any rights or securities convertible into or exchangeable for, options or other rights to acquire from such Person or any of its subsidiaries, or obligation on the part of such Person or any of its subsidiaries to issue, any of the foregoing.
“Excluded Transaction” means (a) any issuance of Equity Securities to employees, officers or directors of the Company or its subsidiaries pursuant to any stock option plan, equity incentive plan (including the Company 2019 Equity Incentive Plan) or other employee benefit arrangement approved by the Board, (b) any issuance of Warrant Shares hereunder or under any other Additional Warrants and/or (c) any issuance of Equity Securities in the following transactions: (i) any acquisition by the Company or any of its subsidiaries of any equity interests, assets, properties or business of any Person; (ii) any merger, consolidation or other business combination involving the Company or any of its subsidiaries (other than a Business Combination subject to Section 6.4); (iii) the commencement of any transaction or series of related transactions involving a change of control of the Company (other than a Business Combination subject to Section 6.4); (iv) any private placement of warrants to purchase Equity Securities of the Company to lenders or other institutional investors in any arm’s length transaction providing debt financing to the Company;
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and (v) any issuance of Equity Securities by the Company in connection with which the Holder exercised its participation or preemptive rights in accordance with the Investment Agreement.
“Exercise” has the meaning set forth in Section 2.2.
“Exercise Date” means the date on which each of the requirements for a Cash Exercise and a Cashless Exercise are satisfied in accordance with Section 2.2(a) and Section 2.2(b), respectively.
“Exercise Price” means $0.01 per share of Common Stock.
“Expiration Date” has the meaning set forth in the introductory paragraph of this Warrant.
“Fair Market Value” of an Equity Security means, as of any date, if such Equity Security is listed or traded on a U.S. national securities exchange or market, the closing sale price of such Equity Security on the Business Day immediately prior to such date as reported in the composite transactions for the principal U.S. national securities exchange or market on which such Equity Security is so listed or traded, or, if no closing sale price is reported, the last reported sale price on the principal U.S. national securities exchange on which such Equity Security is so listed or traded on the Business Day immediately prior to such date, or if such Equity Security is not so listed or traded on a U.S. national securities exchange or market, the last closing bid price of such Equity Security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg Financial Markets, or, if that bid price is not available, the market price of such Equity Security on the Business Day immediately prior to such date as determined by the Board in good faith, which determination shall be provided to the Holder in writing; provided, that if the Holder objects in writing to the market price as determined by the Board within five Business Days of receipt of notice of such determination, such market price shall be determined by an independent financial expert appointed for such purpose, using one or more valuation methods that the independent financial expert in its best professional judgment determines to be most appropriate, assuming such securities are fully distributed and are to be sold in an arm’s-length transaction and there was no compulsion on the part of any party to such sale to buy or sell and taking into account all relevant factors.
“Holder” has the meaning set forth in the introductory paragraph of this Warrant.
“Investment Agreement” means the Investment Agreement, dated as of the Original Issue Date, between the Company and the Holder, as amended, supplemented or otherwise modified from time to time.
“Person” means any individual, firm, corporation, partnership, limited liability company, trust, estate, joint venture, governmental authority or other entity.
“Public Sale” shall mean (a) an underwritten public offering pursuant to an effective registration statement (other than a registration statement on Form S-4, Form S-8 or any successor or other forms promulgated for similar purposes) filed under the Securities Act, (b) a “brokers’ transaction” (as defined in Rule 144), (c) the acquisition, purchase, business combination, merger or consolidation of the Company or any direct or indirect parent of the Company into or with an entity that has, or whose direct or indirect parent has, previously consummated a public offering of Equity Securities and is a public company at the applicable time or (d) an offering pursuant to a direct listing of Equity Securities on a public stock exchange.
“Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.
“Shareholders” means holders of Common Stock.
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“Warrant” has the meaning set forth in the introductory sentence of Section 1.
“Warrant Share” has the meaning set forth in the introductory paragraph of this Warrant.
X = Y*(A - B) ÷ A.
“X” shall mean the net number of shares of Common Stock to be issued to the Holder pursuant to the Cashless Exercise;
“Y” shall mean the number of gross shares of Common Stock that would be issuable upon such exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a Cash Exercise rather than a Cashless Exercise;
“A” shall mean the Fair Market Value as of the Exercise Date;
“B” shall mean the Exercise Price.
The Company and the Holder agree, unless otherwise required by a change in law or by the Internal Revenue Service or other governmental authority following an audit or examination, (i) in the event of a Cashless Exercise under this Section 2.2(b), the Holder’s surrender of this Warrant in exchange for the receipt of the Warrant Shares issuable in accordance with this Warrant (or the portion thereof being cancelled) shall be treated as a recapitalization under Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended and (ii) not to file any tax return inconsistent with the foregoing.
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Notwithstanding the foregoing, this Section 6.3 shall not apply to underwritten offerings registered with the Commission under the Securities Act.
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(A)in any case referred to in clause (a) of this Section 6.11, the occurrence of such event,
(B)in any case referred to in clause (b) of this Section 6.11, the date any such dividend or distribution is paid or made, and
(C)in any case referred to in clause (c) of this Section 6.11, the date of expiration of such rights or warrants.
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[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have each caused this Warrant to be duly executed as of the date first written above.
The ONE Group Hospitality, Inc.
By:
Name:
Title:
[Signature Page to Warrant]
122287375.12 0068288-00026
[________________________________________]
By:
Name:
Title:
[Signature Page to Warrant]
122287375.12 0068288-00026
EXHIBIT A TO WARRANT
PURCHASE FORM
To: The ONE Group Hospitality, Inc.Dated:______________
The undersigned hereby irrevocably elects to purchase ________________ shares of Common Stock of The ONE Group Hospitality, Inc., a Delaware corporation, pursuant to the purchase provisions of Section 2.2 of the attached Warrant and herewith makes payment of $____________, representing the full purchase price for such shares of Common Stock at the price per share provided for in the Warrant.
Cashless Exercise: • (If checked, the aggregate Exercise Price will be paid by withholding shares of Common Stock in accordance with Section 2.2(b) (Cashless Exercise) of the Warrant)
[●]
122287375.12 0068288-00026
EXHIBIT B TO WARRANT
FORM OF RESTRICTIVE LEGEND
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO NUMEROUS CONDITIONS AND RESTRICTIONS, INCLUDING RESTRICTIONS ON TRANSFER, AS SPECIFIED IN THE INVESTMENT AGREEMENT, DATED AS OF MARCH 26, 2024, BY AND BETWEEN THE ONE GROUP HOSPITALITY, INC., A DELAWARE CORPORATION (THE “COMPANY”) AND THE HOLDERS PARTY THERETO, AS AMENDED, RESTATED, SUPPLEMENTED OR MODIFIED FROM TIME TO TIME (THE “INVESTMENT AGREEMENT”). A COPY OF THE INVESTMENT AGREEMENT AS IN EFFECT FROM TIME TO TIME SHALL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (A) HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY FOREIGN JURISDICTION, (B) MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE AND FOREIGN SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS, AND (C) ARE SUBJECT TO AND ARE TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF THE INVESTMENT AGREEMENT.”
122287375.12 0068288-00026
EXHIBIT C TO WARRANT
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________________ (the “Holder”) hereby sells, assigns and transfers all of the rights of the undersigned under the attached Warrant with respect to the number of shares of common stock, par value $0.0001 per share, of [●] covered thereby set forth below, unto:
Name of AssigneeAddressNo. of Shares of Common Stock
__________ (the “Assignee”)
HOLDER
Dated:_______________________
Signature:____________________
Name: ____________________
Title:____________________
By signing below, the Assignee acknowledges that it qualifies as an “accredited investor” as defined in Rule 501(a) promulgated under the Securities Act of 1933, as amended.
ASSIGNEE
Dated:_______________________
Signature:____________________
Name: ____________________
Title:____________________
122287375.12 0068288-00026
EXHIBIT D TO WARRANT
NOTICE
[_________________________________]
c/o [Holder]
[Address]
Attention: [__]
Email: [__]
A copy of all notices provided to the Holder in accordance with the Warrant shall also be provided to the following (provided that delivery of such copy shall not constitute notice):
[_________________________________]
c/o [Holder]
[Address]
Attention: [__]
Email: [__]
with a copy to:
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
Attention:Tracey A. Zaccone
Benjamin Heriaud
Email ***@***
***@***
122287375.12 0068288-00026