| Item 1.01 |
Entry into a Material Definitive Agreement. |
Amended Supply Agreement
As previously reported, Rockwell Medical, Inc.
(the “Company”) has been working to renegotiate certain terms of its supply contracts with the Company’s two largest
customers in an effort to allow the Company to stabilize its concentrates business. On April 6, 2022, the Company and DaVita Inc. (“DaVita”)
entered into an amendment (the “Amendment”) to the Products Purchase Agreement, dated July 1, 2019 (the “Supply
Agreement”) under which the Company supplies DaVita with certain dialysis concentrates. Under the Amendment, the Company
and DaVita agreed to a price increase, effective May 1, 2022, as well as the pass-through of certain costs, determined on a quarterly
basis. Certain costs are subject to a cap. The Amendment will provide the Company with the potential to operate the concentrates business
profitably in the future, subject to cost containment activities to be undertaken by the Company.
The Amendment contains certain covenants with respect
to the Company’s ongoing operations, including a minimum cash covenant, and the requirement to raise additional capital by an outside
date. The Amendment also establishes a joint committee that will oversee certain efficiency and cost-savings activities to be undertaken
by the Company. Cost savings that are realized by the Company will be shared with DaVita in the manner set forth in the Amendment.
Securities Purchase Agreement
Also on April 6, 2022, the Company and DaVita entered
into a Securities Purchase Agreement (the “SPA”), pursuant to which the Company will issue up to $15 million
of preferred stock to DaVita. The Company will initially issue 7,500 shares of a newly designated series of preferred stock, which is
designated “Series X Convertible Preferred Stock” (the “Series X Preferred Stock”) for gross proceeds
of $7,500,000. The Company will issue to DaVita an additional 7,500 shares of Series X Preferred Stock in a second closing (the “Second
Tranche”) for an additional $7,500,000 if the Company raises additional capital by an outside date.
The Series X Preferred Stock will be issued for
a price $1,000 per share, subject to accretion at an interest rate of 1% per annum, compounded annually (the “Face Amount”).
If the Company’s common stock trades above $2.00 for a period of 30 calendar days, interest will thereafter cease to accrue.
The Series X Preferred Stock is convertible to
common stock at rate equal to the Face Amount, divided by a conversion price of $1.00 per share (subject to adjustment for stock splits,
reverse stock splits and similar recapitalization events). As a result, each share of Series X Preferred Stock will initially convert
into 1,000 shares of common stock. DaVita’s right to convert to common stock is subject to a beneficial ownership limitation, which
is initially set at 9.9% of the outstanding common stock, which limitation may be reset (not to exceed 19.9%) at DaVita’s option
and upon providing prior written notice to the Company. The preferred shares issued in the Second Tranche will have a lower conversion
price if the Company raises capital through the issuance of convertible preferred stock prior to the closing of the Second Tranche and
the conversion price of the securities sold in such preferred stock offerings is below $1.00 per share.
The Series X Preferred Stock is entitled to a liquidation
preference on a change of control equal to the greater of the Face Amount or the as-converted value of the underlying common stock. If
the Company sells its dialysis concentrates business while the Series X Preferred Stock remains outstanding, DaVita will have the right
to cause the Company to redeem the Series X Preferred Stock for a purchase price equal to the Face Amount, with the aggregate purchase
price not to exceed the sale proceeds, net of repayment of any indebtedness. Additionally, following effectiveness of the resale registration
statement, the Company has the right to redeem the Series X Preferred Stock on 30 days’ notice at a price equal to the greater of
the Face Amount or the as-converted value of the underlying common stock.
The Series X Preferred Stock is generally non-voting.
However, the approval of the holders of a majority of the Series X Preferred Stock is required for the payment of dividends, designation
of a senior preferred security, changes to terms of the Series X Preferred Stock or the incurrence of indebtedness, subject to certain
exceptions for permitted indebtedness.
The Company has agreed to file a resale registration
statement on Form S-3 for the resale of the common stock underlying the Series X Preferred Stock (the “Conversion Shares”).
DaVita has agreed to a customary lock-up on the Conversion Shares for a period of 180 days from the initial closing.
The foregoing descriptions of the Amendment and
the SPA do not purport to be complete and are qualified in their entirety by reference to the complete text of such agreements, which
the Company intends to file with its quarterly report on Form 10-Q for the quarter ended March 31, 2022.