GIX GigCapital2 Inc

Item 1.01 Entry into a Material Definitive Agreement.

Notes Subscription Agreements, Indenture & Security Agreement

On August 12, 2022, UpHealth, Inc. (“UpHealth” or the “Company”) entered into convertible note subscription agreements (the “Subscription Agreements”), each dated August 12, 2022, with certain institutional investors (the “Investors”), pursuant to which the Company agreed to issue and sell, in a private placement (the “2025 Notes Offering”) expected to close on August 18, 2022 (the “Closing Date”), $67,500,000 in aggregate principal amount of a new series of variable rate convertible senior secured notes due 2025 (the “2025 Notes”). The 2025 Notes are to be issued under an indenture to be entered into between the Company and Wilmington Trust, National Association, a national banking association (“Wilmington Trust”), in its capacity as trustee thereunder (the “Indenture”).

The 2025 Notes will be fully and unconditionally guaranteed on a senior secured basis (the “Guarantees”) by each of the Company’s subsidiaries, except for any foreign subsidiary, any foreign subsidiary holding company, any subsidiaries of any foreign subsidiary, and any subsidiary that is prohibited or restricted from providing a Guarantee or granting security by applicable law or any contractual obligation with non-affiliated third-parties existing on the issue date or at the time such subsidiary becomes a subsidiary and that was not implemented in contemplation of such subsidiary becoming a subsidiary in order to avoid granting a Guarantee or security (such subsidiaries providing Guarantees, the “Guarantors”); provided, however, that a Guarantor will include any domestic subsidiary that Guarantees any indebtedness of the Company. The 2025 Notes will be secured by a first-priority lien, subject only to certain permitted liens, in substantially all assets of the Company and the Guarantors, subject to customary exclusions, pursuant to a security and pledge agreement (the “Security Agreement”) to be entered into concurrently with the Indenture by and among the Company, the Guarantors, and Wilmington Trust as collateral agent on behalf of the holders of the Notes.

The 2025 Notes will (i) bear interest at a rate equal to the daily secured overnight financing rate (“SOFR”) plus 9.0% per annum, with a minimum rate of 10.5% per annum, payable quarterly in arrears, (ii) be convertible into shares of the Company’s common stock, par value $0.0001 per share (“Common Stock”), at a conversion price of $1.75 per share of Common Stock in accordance with the terms of the Indenture, and (iii) mature on December 15, 2025 (the “Maturity Date”).

Following certain corporate events that occur prior to the Maturity Date, the Company will, in certain circumstances, increase the conversion rate for a holder that elects to convert its 2025 Notes in connection with such a corporate event. In addition, in connection with such corporate events, the holders of the 2025 Notes may instead require the Company to repurchase for cash all or part of their 2025 Notes in principal amounts of $1,000 or an integral multiple thereof at a repurchase price that will be equal to 105% of the principal amount of the 2025 Notes to be repurchased, plus accrued and unpaid interest thereon, if any.

At any time when the aggregate Net Proceeds (as defined in the Indenture) to the Company and its subsidiaries from Asset Sales (as defined in the Indenture) exceed $15.0 million, the Company will make an offer (an “Asset Sale Offer”) to all holders of 2025 Notes to repurchase 2025 Notes for an aggregate amount of cash equal to 20.0% of such Net Proceeds (excluding, for the avoidance of doubt, any Net Proceeds previously applied to the repurchase of any 2025 Notes pursuant to any preceding Asset Sale Offer), at a repurchase price per 2025 Note equal to 100.0% of the principal amount thereof, plus accrued and unpaid interest, if any.

On or after June 16, 2024, the Company may redeem (an “Optional Redemption”) for cash all or any portion of the 2025 Notes at a redemption price equal to the Applicable Percentage (as defined in the Indenture) of the principal amount of such 2025 Notes, plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date; provided, however, that if the Company elects to redeem fewer than all of the outstanding 2025 Notes, the Company must, in the case of each Optional Redemption, elect to redeem a minimum of $5.0 million in aggregate principal amount of 2025 Notes. The Company is not required to redeem or retire the 2025 Notes periodically.

The Indenture contains covenants that, among other things, limit the ability of the Company and its subsidiaries to, subject to customary and negotiated carveouts set forth therein: (i) incur additional indebtedness unless expressly subordinate to, and with a maturity date at least one year after, the 2025 Notes, guarantee indebtedness or issue redeemable equity; (ii) create certain senior or pari passu liens; (iii) pay dividends on, repurchase or make distributions on account of capital stock or make other restricted payments; (iv) make certain unpermitted investments; and (v) sell, transfer or otherwise convey certain assets.

The Company will be obligated to list the shares issuable upon conversion of the 2025 Notes by filing a Supplemental Listing Application with the New York Stock Exchange (the “NYSE”) as soon as practicable from the date hereof.

The obligations of each Investor to consummate the subscriptions provided for in the Subscription Agreements are conditioned upon, among other things, the Company not having entered into any subscription agreements with any other investors with a lower purchase price per $1,000 in principal amount of the 2025 Notes or other terms (economic or otherwise) more favorable to such other investors than as set forth in the Subscription Agreement, and the closing under the Subscription Agreements occurring concurrently with the closing under the Note Purchase Agreements (as defined below).

The foregoing description of the Subscription Agreements, the Indenture, the Security Agreement and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the agreed upon forms of Subscription Agreement, Indenture and Security Agreement, copies of which are filed with this Current Report on Form 8-K (this “Current Report”) as Exhibits 10.1, 10.2 and 10.3, respectively, and the terms of which are incorporated herein by reference.

Notes Purchase Agreement

On August 12, 2022, concurrently and in connection with the 2025 Notes Offering, Oppenheimer & Co. Inc. (“OpCo”) commenced a private offer to purchase from the Investors, for the account of the Company, approximately $45,000,000 in aggregate principal amount of Company’s 6.25% convertible senior notes due 2026 (the “2026 Notes”) held by the Investors (the “2026 Notes Repurchase”, and, together with the 2025 Notes Offering, the issuance of the 2025 Notes and the other transactions contemplated thereby, the “Transactions”).

In connection with the 2026 Notes Repurchase, OpCo has entered into a note purchase agreement (the “Note Purchase Agreement”) with each Investor pursuant to which OpCo will purchase 2026 Notes from each Investor, concurrently with each Investor’s purchase of 2025 Notes in the 2025 Notes Offering. Each Investor will have the ability to sell $2.0 million in principal amount of 2026 Notes at 100% of par value for each $3.0 million in principal amount of 2025 Notes purchased in the 2025 Notes Offering.

The Company will use a portion of the net proceeds from the 2025 Notes Offering to fund the 2026 Notes Repurchase and to satisfy other obligations of the Company.

The foregoing description of the Note Purchase Agreement and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by reference to, the agreed upon form of Note Purchase Agreement, a copy of which is filed with this Current Report as Exhibit 10.4 and the terms of which are incorporated herein by reference.

Forward-Looking Statements

This Current Report contains forward-looking statements within the meaning of U.S. federal securities laws. Such forward-looking statements include, but are not limited to, the consummation and expected Closing Date of the Transactions, the successful listing of additional shares for issuance upon conversion of the 2025 Notes, UpHealth’s expectations, hopes, beliefs, intentions, plans, prospects or strategies regarding the future revenue and the business plans of UpHealth’s management team. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. In addition, any statements that refer to projections, forecasts, or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this Current Report are based on certain assumptions and analyses made by the management of UpHealth in light of their respective experience and perception of historical trends, current conditions, and expected future developments and their potential effects on UpHealth as well as other factors they believe are appropriate in the circumstances. There can be no assurance that future developments affecting UpHealth will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the control of the parties), or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements, including the ability of the parties to consummate the Transactions on the Closing Date or at all, that the NYSE will approve UpHealth’s Supplemental Listing Application, the ability of UpHealth to service or otherwise pay its debt obligations, the mix of services utilized by UpHealth’s customers and such customers’ needs for these services, market acceptance of new service offerings, the ability of UpHealth to expand what it does for existing customers as well as to add new customers, that UpHealth will have sufficient capital to operate as anticipated and the impact that the novel coronavirus and the illness, COVID-19, that it causes, as well as government responses to deal with the spread of this illness and the reopening of economies that have been closed as part of these responses, may have on UpHealth’s operations, the demand for UpHealth’s products, global supply chains and economic activity in general. Should one or more of these risks or uncertainties materialize or should any of the assumptions being made prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as may be required under applicable securities laws.

No Offer or Solicitation

This Current Report shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any states or jurisdictions in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.