FiscalNote Holdings Inc

Adoption, Modification or Termination of Rule 10-b-5-1 Plans and Certain Other Trading Arrangements

During the three months ended September 30, 2024, Dominque Taylor, Senior Vice President, People and DEIBA adopted a "Rule 10-b-5-1 trading arrangement," as defined in Item 408(a) of Regulation S-K.

Securities Purchase Agreement

On November 12, 2024 (the “Issuance Date”), FiscalNote Holdings, Inc. (the “Company”) entered into a Securities Purchase Agreement (the “Purchase Agreement”) with EGT 10, LLC (the “Investor”), an investment vehicle managed by Era Global Technologies, LLC (“Era”), pursuant to which the Company issued a senior subordinated convertible note (the “Note”) in an aggregate principal amount of $5.5 million to the Investor (the “Principal Amount”). Era is an investment firm backed by global family offices across multiple countries and markets. Era has directly or indirectly co-invested in various ventures at which Mr. Timothy Hwang, the Company’s Chairman, Chief Executive Officer and Co-Founder, is serving as a director.

The Note matures on November 12, 2027 (the “Maturity Date”) and will bear cash interest at a rate equal to the applicable federal rate published by the Internal Revenue Service beginning on the six-month anniversary of the Issuance Date. The Note is contractually subordinated to the Company’s obligations under its senior secured indebtedness, and accordingly the Company’s right to make certain cash payments in connection therewith is limited by the terms of such subordination agreement (the “Subordination Agreement”). The Investor may convert the Note into shares (the “Underlying Shares”) of the Company’s class A common stock, par value $0.0001 per share (the “Common Stock”), beginning on the six-month anniversary of the Issuance Date (the “Initial Conversion Date”) based on the volume weighted average price of the trailing 30 trading day period prior to the conversion. In addition, the Company may elect to convert all or a portion of the Note into the Underlying Shares (the “Optional Conversion Right”) if the Underlying Shares are registered for resale under the Securities Act of 1933, as amended (the “Securities Act”).

Pursuant to the Purchase Agreement, on the Issuance Date, the Company also issued, as a success fee, 2,549,129 shares of Common Stock to the Investor (the “Success Fee Shares”). The Investor is not permitted to sell the Success Fee Shares before the six-month anniversary of the Issuance Date; provided, however, that if the Company elects to convert any portion of the Note into Underlying Shares pursuant to its Optional Conversion Right, then the Investor may sell a pro-rata portion of the Success Fee Shares.

The Purchase Agreement also requires the Company to issue additional shares of Common Stock (“Additional Shares”) to the Investor if the Investor sells the Success Fee Shares and Underlying Shares within 12 months after the earlier of (i) issuance of all Underlying Shares issued pursuant to the Optional Conversion Right or (ii) the Initial Conversion Date (the “Sell-Off Period”), to the extent such sales of the Success Fee Shares and the Underlying Shares during the Sell-Off Period do not generate aggregate cash proceeds to the Investor that equal or exceed the sum of (1) the Principal Amount plus (2) $2.75 million. Any such Additional Shares would be valued based on the volume weighted average price of the trailing 30 trading day period, calculated prior to the date of any such issuance. In the event the Investor sells the Underlying Shares, Success Fee Shares and/or any Additional Shares for an amount equal to the sum of (1) the Principal Amount plus (2) $2.75 million, the Investor shall be required to return any remaining Underlying Shares, Success Fee Shares and/or Additional Shares, as applicable, and cancel any remaining amount of the Principal Amount owed by the Company.

If the Company were to complete a change of control, merger, combination or similar transaction (a “Fundamental Change”) prior to the expiration of the Sell-Off Period, the Company’s obligation to issue Additional Shares shall be terminated and the Investor will have the right to accelerate the maturity date of the Note. In addition, the Company, in lieu of its obligation to issue Additional Shares, shall be required to repurchase the Success Fee Shares then-held by the Investor for cash consideration equal to $2.75 million minus the net cash proceeds received by the Investor from any prior sales of the Success Fee Shares in the event that any of the following occur: (i) a Fundamental Change results in the Company’s shares not being listed for trading on a national stock exchange, (ii) the Company were to repay the Note prior to the Maturity Date and prior to the expiration of the Sell-Off Period, or (iii) the Company were to file for bankruptcy or experience a similar insolvency event prior to the expiration of the Sell-Off Period.

The Note provides for customary events of default including failure to pay amounts due and owing under the Notes, failure to deliver the Underlying Shares, and other customary events of default similar to those provided under the terms of the Company’s senior secured indebtedness.

The Purchase Agreement includes certain customary representations, warranties and covenants with respect to the Company and the Investor. The representations, warranties and covenants contained in the Purchase Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties therein, and may be subject to limitations agreed upon by the contracting parties. Accordingly, the Purchase Agreement is incorporated herein by reference only to provide investors with information regarding the terms of the Purchase Agreement, and not to provide investors with any other factual information regarding the Company or its business, and should be read in conjunction with the disclosures in the Company’s periodic reports and other filings with the SEC.

The foregoing descriptions of the Purchase Agreement and the Note do not purport to be complete and are qualified in their entirety by reference to the Purchase Agreement and the form of Note, copies of which are filed as Exhibit 10.1 and Exhibit 10.2, respectively, to this Quarterly Report on Form 10-Q and are incorporated herein by reference.

Registration Rights Agreement

On the Issuance Date, in connection with the Purchase Agreement, the Company also entered into a registration rights agreement with the Investor (the “Registration Rights Agreement”), requiring the Company to register for resale the Underlying Shares and Success Fee Shares by filing with the SEC a resale registration statement under the Securities Act within seven days of the Issuance Date. Additionally, the Company is required to register for resale the Additional Shares, if any, by filing with the SEC a second resale registration statement within seven days of the issuance of any Additional Shares.

The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the Registration Rights Agreement, a copy of which is filed as Exhibit 10.3 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Unregistered Sales of Equity Securities

The Note, Underlying Shares, Success Fee Shares and Additional Shares, if any, were or will be, as applicable, issued to the Investor in a private placement pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) promulgated thereunder.

In addition, on the Issuance Date, the Company issued 650,000 shares of Common Stock to Northland Securities, Inc. (the “Brokerage Fee Shares”) to cover the brokerage costs associated with liquidating (i) any Underlying Shares issued pursuant to the Optional Conversion Right and the Success Fee Shares and (ii) the shares of Common Stock previously issued to Era in connection with the Securities Purchase Agreement, by and between the Company and EGT-East LLC, dated as of December 8, 2023, as modified from time to time. The Brokerage Fee Shares were issued in a private placement pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) promulgated thereunder. The Company is required to register for resale the Brokerage Fee Shares.