Item 1.01. Entry into
a Material Definitive Agreement
Purchase Agreement
On
May 22, 2023, Presto Automation Inc. (“Presto” or the “Company”) entered into a Securities Purchase Agreement
(the “Purchase Agreement”) with certain accredited investors named in the Purchase Agreement (collectively, the “Purchasers”),
pursuant to which the Company agreed to sell an aggregate of 4,760,500 newly issued shares of the Company’s common stock, $0.0001
par value per share (the “Common Stock”), at a purchase price of $2.00 per share (the “Private Placement”) for
an aggregate purchase price of approximately $9.5 million. The Purchasers include existing shareholders of the Company and new investors.
The Purchase Agreement contains customary representations, warranties and covenants of the parties, and the closing is subject to customary
closing conditions. The Private Placement is expected to close on or around May 24, 2023.
The
foregoing summary of the Purchase Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full
text of the Form of Purchase Agreement filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.
Registration Rights Agreement
In
connection with the Purchase Agreement and the Private Placement, on May 22, 2023, the Company also entered into a Registration Rights
Agreement with the Purchasers (the “Registration Rights Agreement”). Under the Registration Rights Agreement, the Company
has agreed to file a registration statement (“Registration Statement”) with the Securities and Exchange Commission (the “SEC”)
within 30 days following the date of the Registration Rights Agreement for purposes of registering the resale of the shares of Common
Stock issued in the Private Placement. The Company has also agreed to use commercially reasonable efforts to cause the SEC to declare
the Registration Statement effective as promptly as possible after the filing of the Registration Statement and no later than the earlier
of (i) the 60th calendar day following the date on which an additional Registration Statement is required to be filed
under the Registration Rights Agreement (or, in the event of a “full review” by the Securities and Exchange Commission (the
Commission”), the 90th calendar day following the date such additional Registration Statement is required to be filed
under the Registration Rights Agreement) and (ii) the 5th trading day after the date the Company is notified by the SEC that the Registration
Statement will not be “reviewed” or will not be subject to further review. The Company also agreed to use its commercially
reasonable efforts to keep each Registration Statement continuously effective under the Securities Act of 1933, as amended, (the “Securities
Act”) until the earlier of (i) such time as all of the registrable securities covered by such Registration Statement have been sold
by the holders publicly or sold pursuant to Rule 144 or (ii) the date that all registrable securities covered by such Registration Statement
may be sold by non-affiliates of the Company without volume or manner-of-sale restrictions under Rule 144, and without the requirement
for the Company to be in compliance with the current public information requirements under Rule 144, as determined by counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable to the Company’s transfer agent and the affected holders.
The
foregoing summary of the Registration Rights Agreement does not purport to be complete and is subject to, and qualified in its entirety
by, the full text of the Registration Rights Agreement filed as Exhibit 10.2 to this Current Report on Form 8-K and incorporated herein
by reference.
Second
Amendment to Credit Agreement
On
May 22, 2023, the Company entered into a Second Amendment to Credit Agreement (the “Second Amendment”) with Metropolitan
Partners Group Administration, LLC (“Metropolitan”), the administrative, payment and collateral agent for Metropolitan
Levered Partners Fund VII, LP, Metropolitan Partners Fund VII, LP, Metropolitan Offshore Partners Fund VII, LP and CEOF Holdings LP
(collectively, the “Lenders”), pursuant to which the parties amended certain covenants of the existing credit agreement,
dated as of September 21, 2022 and as amended on March 31, 2023 (the “Credit Agreement”), and the Lenders agreed to the
exchange of an aggregate of $1,000,000 of accrued and previously capitalized interest for warrants to purchase 500,000 shares of
Common Stock at a purchase price of $0.01 per share (the “Conversion Warrants”). The effectiveness of the Second
Amendment is conditioned, in part, upon evidence of a gross amount of additional equity investments of $9 million, to be used for
working capital purposes, which the Company expects to receive upon closing of the Private
Placement.
The
amendments to the covenants in the Credit Agreement include: (i) revising the definition of “minimum unrestricted cash” from
(A) an amount equal to the operating expenses of the Company determined on a consolidated basis for the prior six months plus $1,100,000
to (B) $10,000,000, to be held in a separate and blocked cash collateral account and (ii) adding a new financial covenant beginning for
the month ending June 30, 2023, that restricts the decrease in the Company’s operating cash to no more than $10,000,000 for each
rolling three month period, subject to certain customary operating fluctuations and adjustments.
The
foregoing summary of the Second Amendment does not purport to be complete and is subject to, and qualified in its entirety by, the full
text of the Second Amendment filed as Exhibit 10.3 to this Current Report on Form 8-K and incorporated herein by reference.
Second Amended and
Restated Fee Letter
In
connection with the effectiveness of the Second Amendment and in consideration for Metropolitan’s entering into the Second Amendment,
the Company intends to enter into the Second Amended and Restated Fee Letter (the “Fee Letter”) with Metropolitan, pursuant
to which the Company issued warrants to purchase 2,000,000 shares of Common Stock, with an exercise price of $0.01 per share (the “Second
Amendment Warrants” and, together with the Conversion Warrants, the “Warrants”), to the Lenders as an amendment fee.
The
foregoing summary of the Fee Letter does not purport to be complete and is subject to, and qualified in its entirety by, the full text
of the Fee Letter filed as Exhibit 10.4 to this Current Report on Form 8-K and incorporated herein by reference.
Warrants to Purchase
Common Stock
In
connection with the effectiveness of the Second Amendment, the Company will issue the Warrants. The Warrants may be exercised for cash
or pursuant to a net exercise at any time on or before the date that is the five year anniversary of the date of the issuance of the Warrants;
provided, that the Company shall not effect the exercise of any portion of the warrant to the extent that giving effect to such
exercise, the holder thereof, together with its affiliates collectively would beneficially own in excess of 4.99% of the Common Stock
outstanding immediately after giving effect to such exercise.
In connection with the issuance
of the Warrants, the Company granted the Lenders customary registration rights with respect to the
shares of Common Stock issuable upon exercise of the Warrants described above, pursuant to the registration rights agreement, dated
as of March 31, 2023, by and among the Company and the Lenders (the “Metropolitan Registration Rights Agreement”). Under
the Metropolitan Registration Rights Agreement, the Company has agreed to file a Registration Statement with the SEC within 30 days following
the date of the issuance of the Warrants for purposes of registering the resale of the shares of Common Stock underlying the Warrants.
The Company has also agreed to use its reasonable best efforts to cause the SEC to declare the Registration Statement effective as soon
as possible after the filing of the Registration Statement and no later than the earlier of (i) the 60th calendar day following
the date on which an additional Registration Statement is required to be filed under the Registration Rights Agreement (or, in the event
of a “full review” by the Securities and Exchange Commission (the Commission”), the 90th calendar day following
the date such additional Registration Statement is required to be filed under the Registration Rights Agreement) and (ii) the 3rd business
day after the date the Company is notified by the SEC that the Registration Statement will not be “reviewed” or will not be
subject to further review.
The
foregoing summary of the Warrants and the Metropolitan Registration Rights Agreement does not purport to be complete and is subject to,
and qualified in its entirety by, the full text of the Warrants and the Metropolitan Registration Rights Agreement filed as Exhibits 10.5,
10.6, 10.7, 10.8 and 10.9 to this Current Report on Form 8-K and incorporated herein by reference.
