Eos Energy Enterprises, Inc.

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If we fail to meet the covenants in Credit Agreement, we may be subject to default on the loan, which could have a material adverse effect on our business.

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The Credit Agreement contains various affirmative and negative covenants applicable to the Company including, among others, as defined in the Credit Agreement (i) meeting certain Minimum Consolidated EBITDA, Minimum Consolidated Revenue, and Minimum Liquidity (the cash in accounts controlled by the Agent,) measured quarterly, (ii) reporting and information covenants including the delivery of annual, quarterly and monthly financial statements, daily cash reports, annual financial plans and forecasts with weekly progress reports and updates, (iii) monthly meetings with the Lenders and the engagement of advisors and consultants requested by the Lenders, and (iv) restrictions on business and activities including debt incurrence, asset dispositions, distributions, investments, and modifications to or terminations of various material contracts. The Credit Agreement is subject to certain events of default which can be triggered by, among other things, (i) breach of payment obligations and other obligations and representations in the Credit Agreement nor related documents, (ii) default under other debt facilities with a principal above a predetermined amount, (iii) failure to perform or comply with certain covenants in the Credit Agreement, (iv) entry into a decree or order for relief in respect of the Company or any of its subsidiaries in an involuntary case under the Bankruptcy Code of the United States or under any other debtor relief law,(v) any money judgment, writ or warrant of attachment or similar process involving in the aggregate at any time an amount in excess of $2.5 million, (vi) any order, judgement or decree entered against the Company or the any of its subsidiaries decreeing the dissolution or split up of such entity, (vii) the failure of the Common Stock to be listed on an internationally recognized stock exchange in the United States and (viii) a change of control.

Previous report

Since the Company was not in compliance with the financial covenant for Minimum Consolidated Revenue for the three months ended September 30, 2024, the Company secured a waiver from Cerberus. The Company expects it may be unable to remain in compliance with the Minimum Consolidated Revenue financial covenant beginning December 31, 2024, absent the Company’s ability to secure a waiver or amend the Credit Agreement. In the event the Company is unable to comply with all financial covenants when required under the Credit Agreement, and the Company is unable to secure another waiver or amendment to the Credit Agreement, Cerberus may, at its discretion, exercise any and all of its existing rights and remedies, which may include, among other things, asserting its rights in the Company’s assets securing the loan, and the Lenders may no longer be required to continue funding under the Credit Agreement. There can be no assurance that the Company will be able to secure funding under the Credit Agreement or outside sources of capital in the event it fails to meet a funding milestone. Moreover, the Company’s other lenders may exercise similar rights and remedies under the cross-default provisions of their respective borrowing arrangements with the Company. Any such default on the Credit Agreement could have a material adverse effect on our business.

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Under the terms of the Credit Agreement, current stockholders may be subject to significant dilution, and the voting power of the currently outstanding Common Stock could be significantly diluted.

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As of November 1, 2024, there were 217,904,747 shares of Common Stock issued and outstanding and an aggregate of 242,556,689 shares of Common Stock issuable upon the conversion or exercise of outstanding convertible securities, including 142,282,584 shares of Common Stock underlying the SPA Warrant and Series B Preferred Stock issued to Cerberus.

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If the Purchaser funds all future draws under the Delayed Draw Term Loan and the Company meets each of the milestones under the Delayed Draw Term Loan, the Purchaser will be entitled to receive Series B Preferred Stock and/or Contingent Warrants that, when aggregated with the SPA Warrant and Series B Preferred Stock, equal 33.0% of the issued and outstanding Common Stock on a fully diluted basis. Assuming the Company issues no other securities after November 1, 2024, such Series B Preferred Stock, SPA Warrant and Contingent Warrants (such warrants, collectively, the “Warrants”) would aggregate to an equivalent of 156,714,957 shares of Common Stock. If the Purchaser funds all draws under the Delayed Draw Term Loan and the Company fails to meet all of the remaining milestones under the Delayed Draw Term Loan, the Purchaser would be entitled to receive Preferred Stock and/or Contingent Warrants (depending on whether stockholder approval has been received) that, when aggregated with the SPA Warrant and Series B Preferred Stock, equal 41.0% of the issued and outstanding Common Stock on a fully diluted basis, assuming the Warrants and Series B Preferred stock were fully convertible into Common Stock. Assuming the Company issues no other securities after November 1, 2024, such Preferred Stock and Warrants would aggregate to an equivalent of 221,107,338 shares of Common Stock.

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In addition, if the Company were to issue additional shares of Common Stock or securities convertible or exercisable into Common Stock or trigger anti-dilution protection under the Preferred Stock and Warrants, the Preferred Stock and Warrants may become convertible or exercisable into additional shares of Common Stock. The issuance, pursuant to the terms of the Warrants and the Series B Preferred Stock, of Common Stock will dilute the percentage ownership interest of all stockholders, could dilute the book value per share of the Common Stock and will increase the number of the Company’s outstanding shares, and upon conversion or exercise would dilute the voting power of the Common Stock, which could cause the market price of our Common Stock to decrease. Depressed trading prices of our Common Stock could further impair our ability to raise sufficient capital to carry on our business.

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The Company may need to seek alternative sources of capital, or risk its ability to continue operations, in the event it fails to meet a milestone under the terms of the Credit Agreement and the SPA.

Previous report

Pursuant to the terms of the Credit Agreement and the SPA, the Purchaser is not required to provide funding under the Delayed Draw Term Loan in the event that the Company does not meet the necessary performance and funding milestones stipulated in the Credit Agreement. In the event the Company does not meet these milestones and the Purchaser chooses not to continue funding, the Company would need to seek alternative sources of capital, which may not be available on favorable terms or at all. If the Purchaser does not continue funding, and the Company’s efforts to raise additional outside capital prove unsuccessful, management would be required to seek other strategic alternatives, which may include, among others, a significant curtailment in the Company’s operations, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors and/or allowing the Company to become insolvent.

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A substantial number of shares of the Company’s Common Stock that are issuable upon the exercise or conversion of securities issuable under the Delayed Draw Term Loan and the SPA are subject to a contractual lockup.

Previous report

Under the terms of the Delayed Draw Term Loan and the SPA, the holders of our securities issuable thereunder are subject to a contractual lockup that expires on June 21, 2025. The securities issuable under the Delayed Draw Term Loan and the SPA represent a substantial portion of our outstanding shares of Common Stock and, subject to stockholder approval and beneficial ownership limitations, have the potential to represent an even larger portion of our outstanding shares of common Stock, and we are obligated to register the resale of these shares of Common Stock by the holders.

Previous report

Upon the effectiveness of the resale registration statement or otherwise in accordance with Rule 144 under the Securities Act and after expiration or waiver of the lock-up, the holders may sell our Common Stock in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility in the trading price of our Common Stock or putting significant downward pressure on the price of our Common Stock.

Previous report

The resale, or expected or potential resale, of a substantial number of shares of our Common Stock in the public market could adversely affect the market price for our Common Stock and make it more difficult for you to sell your Common Stock at times and prices that you feel are appropriate. Furthermore, because there will be a large number of shares registered pursuant to the registration statement, selling holders could continue to offer the securities covered by the registration statement for a significant period of time, the precise duration of which cannot be predicted. Accordingly, the adverse market and price pressures resulting from an offering pursuant to a registration statement may continue for an extended period of time.

Previous report

Further, sales of our Common Stock upon expected expiration of resale restrictions could encourage short sales by market participants. Generally, short selling means selling a security, contract or commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously sold. Short sales are used to capitalize on an expected decline in the security’s price. As such, short sales of our Common Stock could have a tendency to depress the price of our Common Stock, which could further increase the potential for short sales.

Previous report

We cannot predict the size of future issuances or sales of our Common Stock or the effect, if any, that future issuances and sales of our Common Stock will have on the market price of our Common Stock. Sales of substantial amounts of our Common Stock, including issuances made in the ordinary course of the Company’s business, or the perception that such sales could occur, may materially and adversely affect prevailing market prices of our Common Stock.