Contract analysis

I. EXECUTIVE SUMMARY This memorandum analyzes the interaction between the Most Favored Nation ("MFN") clause proposed to be included in the convertible promissory notes (the "Bridge Notes") to be issued in Skybridge Fintech Ltd.'s (the "Company") $60,000,000 convertible note bridge financing (the "Bridge Financing") and the existing anti-dilution protections set forth in the Company's Amended and Restated Certificate

II. BACKGROUND A. The Proposed Convertible Note Bridge Financing The Bridge Financing contemplates the issuance and sale of convertible promissory notes in an aggregate principal amount of $60,000,000 pursuant to a Note Purchase Agreement to be entered into by the Company and the Purchasers. The key economic and structural terms of the Bridge Notes, as set forth in the Term Sheet, are summarized below. Interest. The

III. LEGAL ANALYSIS: THE MFN PROVISION IN DETAIL A. Mechanics of the MFN Provision The MFN provision, as contemplated in the Term Sheet and as we anticipate drafting it in the Note Purchase Agreement, operates as follows: Applicability. The MFN right applies exclusively to the Bridge Notes issued in the Bridge Financing. It does not apply to any other securities of the Company, including the existing preferred stock,

IV. LEGAL ANALYSIS: EXISTING ANTI-DILUTION PROTECTIONS A. Structure of the Weighted-Average Anti-Dilution Provisions The Charter provides that upon the issuance of Additional Shares of Common Stock at a price per share below the then-effective conversion price for any series of preferred stock, the conversion price for that series is adjusted downward pursuant to a broad-based weighted-average formula. The formula, a

V. INTERACTION SCENARIOS The following scenarios illustrate the range of potential interactions between the MFN provision and the anti-dilution protections. These scenarios are not exhaustive but are designed to capture the most likely outcomes and the most significant risk vectors. A. Scenario 1: Qualified Financing (Series D) at or Above the Valuation Cap Assumptions. The Company completes the Series D Financing at

VI. CIRCULARITY AND DEFINITIONAL ISSUES A. The Fully Diluted Share Count Problem As illustrated in Scenarios 2, 3, and 4, the interaction between the Bridge Note conversion mechanics and the anti-dilution provisions can create a circularity problem when the Valuation Cap conversion price is defined as a function of the fully diluted share count, and the fully diluted share count is itself affected by anti-dilution ad

1. The Cap Price is calculated by dividing the Valuation Cap ($750,000,000, or $500,000,000 if MFN-adjusted) by the number of fully diluted shares outstanding.

2. If the Cap Price is below the conversion price of any series of preferred stock, conversion at the Cap Price triggers a weighted-average anti-dilution adjustment for that series.

3. The anti-dilution adjustment reduces the conversion price of the affected series, which increases the number of shares issuable upon conversion of that series on an as-converted basis.

4. The increased number of as-converted shares increases the fully diluted share count.

5. The increased fully diluted share count, if used as the denominator in the Cap Price calculation, decreases the Cap Price.

6. The decreased Cap Price may trigger additional anti-dilution adjustments, or increase the magnitude of existing adjustments, restarting the cycle at step 2. This circularity is a well-recognized problem in convertible note transactions with valuation caps, particularly when the issuer's charter contains anti-dilution provisions. The circularity does not produce an infinite loop — it converges to a fixed point thro

VII. DUAL-HAT INVESTOR CONSIDERATIONS Three of the four Purchasers in the Bridge Financing also hold existing preferred stock in the Company, creating dual-hat positions that warrant careful attention from a fiduciary, disclosure, and structural perspective. Halcyon Growth Equity, L.P. Halcyon is the sole holder of the Company's Series B Preferred Stock and is committing $5,000,000 as a Purchaser of Bridge Notes. In

VIII. IMPACT ON PLANNED SERIES D The Company plans to raise at least $80,000,000 in new equity capital in a Series D Preferred Stock financing in the Q3-Q4 2024 timeframe (the "Series D Financing"). The Series D Financing is expected to constitute the "Qualified Financing" under the Bridge Notes, triggering automatic conversion of the Bridge Notes into Series D Preferred Stock. The interaction between the Bridge Note

IX. RECOMMENDATIONS Based on the foregoing analysis, we respectfully recommend that the Company take the following steps in connection with the drafting and negotiation of the Bridge Financing documentation:

1. Definitional Clarity. Define "fully diluted capitalization" (or the equivalent term) precisely in the Note Purchase Agreement and in the form of Bridge Note. The definition should specify the measurement date and methodology to avoid circularity with anti-dilution adjustments triggered by the conversion of the Bridge Notes. We recommend using either a fixed-date measurement (e.g., immediately prior to the Qualifie

2. MFN Scope Limitations. Consider narrowing the MFN provision to exclude certain categories of immaterial or non-dilutive issuances. At a minimum, ensure that the MFN does not apply to equity issuances (which are separately governed by anti-dilution and preemptive rights) and confirm the inclusion of the standard carve-outs descr