Item 1.01 Entry into a Material definitive Agreement.
On May 18, 2023, Pono Capital Two, Inc., a Delaware corporation (the "Company"
or "Pono") and SBC Medical Group Holdings Incorporated, a Delaware corporation
("SBC"), entered into a Note Purchase Agreement (the "Note Purchase Agreement").
SBC is the counterparty to the previously announced Agreement and Plan of
Merger, dated as of January 31, 2023 (as amended to date, the "Merger
Agreement"), pursuant to which a proposed business combination (the "Business
Combination") among the Company, SBC and Merger Sub, Inc. ("Merger Sub") would
occur in which Merger Sub would merge with and into SBC, with SBC continuing as
the surviving corporation. The Note Purchase Agreement and related Note (as
defined below) are being entered into in connection with the amendment to the
Merger Agreement dated as of April 26, 2023.
Pursuant to the Note Purchase Agreement, the Company and SBC have agreed,
subject to the terms and conditions set forth in the Note Purchase Agreement,
that the Company will issue and sell to SBC a convertible promissory note (the
"Note") of $1,000,000 in aggregate principal amount (the "Principal Amount").
The Note is convertible into shares of Class A Common Stock, par value $0.0001
per share ("Common Stock"), of the Company. The Note Purchase Agreement contains
customary conditions to closing, and the representations and warranties of each
party under the Note Purchase Agreement survive the Closing and are binding on
any successors or assigns of the Company following the consummation of any such
business combination.
On the closing date of the purchase and sale of the Note (the "Closing"), SBC
will deliver the Note reflecting the Principal Amount and SBC will deposit
$1,000,000 by wire transfer into the specified Company account. Pursuant to the
terms of the Note Purchase Agreement, the Closing shall occur not later than May
31, 2023, subject to the satisfaction or waiver of the conditions to the Closing
as set forth in the Note Purchase Agreement. The Note does not bear interest
(unless otherwise required by applicable law, in which event interest will
accrue at the minimum rate required by applicable law) and the Principal Amount
may be prepaid at any time.
Immediately prior to the merger being effected in connection with the
consummation of the Business Combination, the outstanding Principal Amount will
be converted automatically into the number of shares of Common Stock equal to
the quotient obtained by dividing (x) the Principal Amount by (y) $10.00,
subject to customary adjustments for any stock splits or combinations occurring
prior to conversion. Upon issuance of the shares of Common Stock, SBC agreed to
enter into a lock-up agreement with respect the shares of Common Stock upon
consummation of the Business Combination, in substantially the same form as the
one attached to the Merger Agreement, providing for a lock-up period commencing
on the closing date of the Business Combination and ending on the earlier of (a)
six months from the closing date, (b) the date the Company consummates a
liquidation, merger, share exchange or other similar transaction with an
unaffiliated third party that results in all of the Company's stockholders
having the right to exchange their shares of Common Stock for cash, securities
or other property, and (c) the date on which the closing sale price of Common
Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock
dividends, reorganizations and recapitalizations and the like) for any twenty
(20) trading days within any thirty (30) trading day period commencing at least
one hundred and fifty (150) days after the closing date; provided that ? of such
restricted shares shall be released from such restrictions if the closing stock
price of the shares of Common Stock reaches each of $13.00, $15.00, and $17.00.
In accordance with the terms of the Note, the repayment of the Note shall be
accelerated upon the occurrence of an Event of Default (as defined in the Note),
whereupon SBC may at any time at its option declare the unpaid Principal Amount
due and payable and may exercise all other rights and remedies available to it.
The Note may not be assigned or transferred without the prior written consent of
the other party thereto.
The foregoing description is qualified in its entirety by reference to the Note
Purchase Agreement, and the forms of the Note and the lock-up agreement, copies
of which are attached hereto as Exhibits 10.1, 10.2, and 10.3, respectively, and
are incorporated herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
The information set forth above in Item 1.01 of this Report is incorporated by
reference herein. The Note provides for the conversion of 100,000 shares of
Common Stock, subject to the terms and conditions of the Note. The shares are
being issued and sold by the Company to SBC in reliance upon the exemption from
the registration requirements of the Securities Act afforded by Section 4(a)(2)
of the Securities Act.
Item 3.02 Unregistered Sales of Equity Securities.
The information set forth above in Item 1.01 of this Report is incorporated by
reference herein.
Forward Looking Statements
Certain statements herein are "forward-looking statements" within the meaning of
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to the proposed business combination. These forward-looking
statements generally are identified by the words "believe," "project," "expect,"
"anticipate," "estimate," "intend," "strategy," "aim," "future," "opportunity,"
"plan," "may," "should," "will," "would," "will be," "will continue," "will
likely result" and similar expressions, but the absence of these words does not
mean that a statement is not forward-looking. Forward-looking statements are
predictions, projections and other statements about future events that are based
on current expectations and assumptions and, as a result, are subject to risks
and uncertainties. Actual results may differ from their expectations, estimates
and projections and consequently, you should not rely on these forward-looking
statements as predictions of future events. Many factors could cause actual
future events to differ materially from the forward-looking statements contained
herein, including but not limited to: (i) the risk that the Business Combination
may not be completed in a timely manner or at all, which may adversely affect
the price of Pono's securities; (ii) the failure to satisfy the conditions to
the consummation of the Business Combination, including the approval of the
Merger Agreement by the stockholders of Pono; (iii) the occurrence of any event,
change or other circumstance that could give rise to the termination of the
Merger Agreement; (iv) the outcome of any legal proceedings that may be
instituted against any of the parties to the Merger Agreement following the
announcement of the entry into the Merger Agreement and proposed business
combination; (v) redemptions exceeding anticipated levels or the failure to meet
The Nasdaq Capital Market's initial listing standards in connection with the
consummation of the proposed business combination; (vi) the effect of the
announcement or pendency of the proposed business combination on SBC' business
relationships, operating results and business generally; (vii) risks that the
proposed business combination disrupts the current plans of SBC; (viii) the risk
that Pono and SBC will need to raise additional capital to execute its business
plans, which may not be available on acceptable terms or at all; (ix) the
ability of the parties to recognize the benefits of the Merger Agreement and the
Business Combination; (x) the lack of useful financial information for an
accurate estimate of future capital expenditures and future revenue; (xi)
statements regarding SBC' industry and market size; (xii) financial condition
and performance of SBC and Pono, including the anticipated benefits, the implied
enterprise value, the expected financial impacts of the Business Combination,
potential level of redemptions of Pono's public stockholders, the financial
condition, liquidity, results of operations, the products, the expected future
performance and market opportunities of SBC; and (xiii) those factors discussed
in Pono's filings with the SEC and that that will be contained in the proxy
statement relating to the Business Combination. You should carefully consider
the foregoing factors and the other risks and uncertainties that will be
described in the "Risk Factors" section of the proxy statement and other
documents to be filed by Pono from time to time with the Securities and Exchange
Commission ("SEC"). These filings identify and address other important risks and
uncertainties that could cause actual events and results to differ materially
from those contained in the forward-looking statements. Forward-looking
statements speak only as of the date they are made. Readers are cautioned not to
put undue reliance on forward-looking statements, and while SBC and Pono may
elect to update these forward-looking statements at some point in the future,
they assume no obligation to update or revise these forward-looking statements,
whether as a result of new information, future events or otherwise, subject to
applicable law. None of SBC or Pono gives any assurance that SBC and Pono will
achieve their respective expectations.
Additional Information and Where to Find It
Pono intends to file with the SEC a proxy statement containing information about
the proposed transaction and the respective businesses of SBC and Pono. Pono
will mail a definitive proxy statement and other relevant documents after the
SEC completes its review. Pono stockholders are urged to read the preliminary
prospectus and proxy statement and any amendments thereto and the final
prospectus and definitive proxy statement in connection with the solicitation of
proxies for the special meeting to be held to approve the proposed transaction,
because these documents will contain important information about Pono, SBC, and
the Business Combination. The definitive proxy statement will be mailed to
stockholders of Pono as of a record date to be established for voting on the
proposed transaction. Stockholders of Pono will also be able to obtain a free
copy of the proxy statement, as well as other filings containing information
about Pono without charge, at the SEC's website (www.sec.gov). Copies of the
proxy statement and Pono's other filings with the SEC can also be obtained,
without charge, by directing a request to: Pono Capital Two, Inc, 643 Ilalo St.
#102, Honolulu, Hawaii 96813 or calling (808) 892-6611.
No Offer or Solicitation
This Current Report on Form 8-K does not constitute (i) a solicitation of a
proxy, consent, or authorization with respect to any securities or in respect of
the proposed business combination, or (ii) an offer to sell or the solicitation
of an offer to buy any securities, or a solicitation of any vote or approval,
nor shall there be any sale of securities in any jurisdiction in which such
offer, solicitation, or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction. No offering of
securities shall be made except by means of a prospectus meeting the
requirements of the Securities Act.
Participants in the Solicitation
SBC and Pono and their respective directors and officers and other members of
management and employees may be deemed participants in the solicitation of
proxies in connection with the Business Combination. Pono stockholders and other
interested persons may obtain, without charge, more detailed information
regarding directors and officers of Pono in Pono's Annual Report on Form 10-K
filed with the SEC on March 9, 2023. Information regarding the persons who may,
under SEC rules, be deemed participants in the solicitation of proxies from
Pono's stockholders in connection with the proposed business combination will be
included in the definitive proxy statement Pono intends to file with the SEC.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
The following exhibits are being filed herewith:
Exhibit No. Description
10.1 Note Purchase Agreement, dated as of May 18, 2023, by and between
Pono Capital Two, Inc. and SBC Medical Group Holdings
Incorporated.
10.2 Form of Convertible Promissory Note.
10.3 Form of Lock-Up Agreement (incorporated by reference to Exhibit
10.1 to the Company's Current Report on Form 8-K, filed with the SEC
on February 2, 2023).
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