Item 1.01 Entry into a Material Definitive Agreement.
On July 29, 2022 (the “Effective Date”), Berkshire Grey, Inc. (the “Company”) and FCJI, Inc. (“FedEx Affiliate”), a wholly owned subsidiary of FedEx Corporation, entered into a Transaction Agreement (the “Transaction Agreement”), pursuant to which the Company agreed to issue to FedEx Affiliate a warrant (the “Warrant”) to acquire up to 25,250,616 shares (the “Warrant Shares”) of the Company’s Class A common stock, par value $0.0001 per share (“Common Stock”), subject to certain vesting events described below. Other affiliates of FedEx Corporation are current customers of the Company.
The Company and FedEx Affiliate entered into the Transaction Agreement in connection with a master professional services agreement that the Company and FedEx Corporation entered into on July 29, 2022, with respect to which FedEx Corporation engaged the Company to provide broader AI robotic automation capabilities. The Company also expects to enter into a master system purchase agreement with FedEx Corporation later in 2022 that will be leveraged to streamline and expedite the procurement process for expanding the supply of the Company’s AI robotic automation to FedEx Corporation and its affiliates. The vesting of the Warrant Shares, described in more detail below, is subject to certain milestones, including signing these commercial agreements as well as other commercial transactions between FedEx Corporation (and its affiliates) and the Company.
Warrant Terms
The Warrant Shares will generally vest and become exercisable from time to time, incrementally, if and as FedEx Corporation and its affiliates, directly or indirectly through third parties, make a combination of binding orders and qualified payments of at least $20 million for goods and services associated with orders received after June 1, 2022, and fully vest and become exercisable when such binding orders and qualified payments reach at least $200 million. No vesting event will occur after December 31, 2025. FedEx Corporation and its affiliates are not currently required to place any orders or make any payments under the master system purchase agreement being negotiated.
Subject to vesting and certain conditions set forth in the Transaction Agreement, the Warrant is exercisable, in whole or in part, and for cash or on a net exercise basis, at any time before July 29, 2032, at an exercise price of $1.67 per share, which was determined based on the 30-day volume-weighted average price for the Common Stock as of July 29, 2022. Both the exercise price and the number of Warrant Shares subject to purchase pursuant to the Warrant are subject to customary anti-dilution adjustments.
The foregoing summary is qualified in its entirety by reference to the Warrant, which is filed as Exhibit 4.1 hereto and is incorporated herein by reference.
Transaction Agreement
The Transaction Agreement sets forth certain governance arrangements and provisions relating to FedEx Affiliate, including customary registration rights, and includes customary representations and warranties and covenants of the Company and FedEx Affiliate.
The Transaction Agreement contains certain restrictions on FedEx Affiliate’s ability to transfer the Warrant and Warrant Shares. The Transaction Agreement also contains certain customary standstill restrictions that remain in effect during the period from the Effective Date until the earlier of the date that the Warrant has been exercised in its entirety and the five-year anniversary of the Effective Date (the “Standstill Period”). During the Standstill Period, FedEx Affiliate and its affiliates will be required to vote all of their shares of Common Stock in excess of 4.9% of the Company’s outstanding shares of Common Stock (if any such shares are owned by FedEx Affiliate or its affiliates) in accordance with the recommendation of the Company’s Board of Directors, except with respect to matters with bearing on the commercial interests of FedEx Affiliate or its affiliates, as determined in the sole discretion of FedEx Affiliate.
The issuance of the Warrant and the Warrant Shares, which are subject to the terms and conditions set forth in the Transaction Agreement and the Warrant, has not been registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) promulgated thereunder. The Warrant was issued only to FedEx Affiliate in connection with the transactions contemplated by the Transaction Agreement. This current report on Form 8-K does not constitute an offer to sell, or a solicitation of an offer to buy, any security and shall not constitute an offer, solicitation or sale in any jurisdiction in which such offering would be unlawful.
The foregoing summary is qualified in its entirety by reference to the Transaction Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.