1009-00001 · Skybridge Fintech Ltd · Correspondence

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CALDERWOOD & HARKNESS LLP Attorneys at Law

600 Lexington Avenue New York, New York 10022

Telephone: (212) 554-7000 Facsimile: (212) 554-7001 www.calderwoodharkness.com

December 15, 2023

VIA EMAIL AND OVERNIGHT COURIER

Theodore "Ted" Marsh Relationship Manager Kelvantis Lending Corp. 350 Park Avenue, 18th Floor New York, New York 10022

Re: Request for Lender Consent and Waiver under Loan and Security Agreement, dated August 15, 2022, by and between Kelvantis Lending Corp. and Skybridge Fintech Ltd. — Proposed Convertible Note Bridge Financing

Dear Mr. Marsh:

1. Introduction and Representation

This firm represents Skybridge Fintech Ltd., a corporation organized and existing under the laws of the State of Delaware ("Skybridge" or the "Company"), Employer Identification Number 83-2147605, Delaware Division of Corporations File Number 6384291, with its principal office located at 1400 Market Street, Suite 2200, Wilmington, Delaware 19801. We write to you in our capacity as outside counsel to the Company in connection with the matters described herein. This matter is being handled under Calderwood & Harkness LLP Matter No. 1009-00001.

As you are aware, Kelvantis Lending Corp. ("Kelvantis" or the "Lender") and Skybridge are parties to that certain Loan and Security Agreement, dated as of August 15, 2022 (as amended, restated, supplemented, or otherwise modified from time to time, the "Loan Agreement"), pursuant to which Kelvantis extended a venture debt facility to Skybridge. As of the date of this letter, the aggregate outstanding principal amount under the Loan Agreement is Fifteen Million Dollars ($15,000,000), with a stated maturity date of August 15, 2025. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement unless the context otherwise requires.

The purpose of this letter is to respectfully request, on behalf of the Company, Kelvantis's consent and waiver under certain provisions of the Loan Agreement in connection with a proposed convertible note bridge financing that Skybridge intends to consummate in early 2024. As described more fully below, the Company has received commitments from a syndicate of existing and new investors for an aggregate of Sixty Million Dollars ($60,000,000) in subordinated convertible promissory notes. We believe this transaction represents a significant positive development for the Company and, by extension, is supportive of Kelvantis's interests as the Company's senior secured lender. We respectfully request Kelvantis's consideration and approval of this transaction as set forth herein.

2. Description of the Proposed Transaction

Skybridge proposes to issue convertible promissory notes (collectively, the "Notes") in an aggregate principal amount of Sixty Million Dollars ($60,000,000) to a syndicate of existing and new investors (the "Purchasers"), pursuant to a Note Purchase Agreement to be entered into by and among the Company and the Purchasers (the "Note Purchase Agreement"). A summary of the principal terms of the proposed transaction is set forth below.

The Notes will bear simple interest at a rate of six percent (6.00%) per annum (600 basis points), calculated on the basis of a 365-day year and actual days elapsed. Based on the full principal amount of $60,000,000, the annual interest accrual on the Notes will be Three Million Six Hundred Thousand Dollars ($3,600,000). Interest on the Notes will accrue from and including the applicable closing date and will not be payable in cash prior to maturity or conversion, except as otherwise provided in the Notes.

The Notes will mature twenty-four (24) months from the date of the initial closing (the "Maturity Date"). Based on the anticipated initial closing date of January 15, 2024, the anticipated Maturity Date would be January 15, 2026. We note for Kelvantis's reference that this anticipated Maturity Date falls approximately five (5) months after the August 15, 2025 maturity date of the existing facility under the Loan Agreement.

The Notes contain the following conversion mechanics:

(a) Automatic Conversion upon Qualified Financing. The Notes will automatically convert into equity securities of the Company upon the consummation of a Qualified Financing, which is defined as a Series D preferred equity financing in which the Company raises at least Eighty Million Dollars ($80,000,000) in new equity capital (excluding the conversion of the Notes and any other convertible securities). Upon a Qualified Financing, the Notes will convert at a conversion price per share equal to the lower of (i) a twenty percent (20%) discount to the per-share price paid by the new investors in the Series D round, or (ii) the per-share price implied by a pre-money valuation cap of Seven Hundred Fifty Million Dollars ($750,000,000) (the "Valuation Cap"). Based on the Company's approximately 48,500,000 fully diluted shares outstanding on a pre-bridge basis, the price per share implied by the Valuation Cap is approximately Fifteen Dollars and Forty-Six Cents ($15.46).

(b) Optional Conversion or Repayment at Maturity. In the event that no Qualified Financing occurs prior to the Maturity Date, each holder of Notes may, at its election, either (i) convert the outstanding principal amount of its Notes, together with all accrued and unpaid interest thereon, into equity securities of the Company at a price per share equal to the Valuation Cap price, or (ii) demand repayment of the outstanding principal amount of its Notes, together with all accrued and unpaid interest thereon, in cash.

(c) Change of Control Provision. In the event of a Change of Control of the Company (as defined in the form of Note), each holder of Notes shall be entitled to receive, at the Company's election, the greater of (i) two times (2.0x) the outstanding principal amount of such holder's Notes, together with all accrued and unpaid interest thereon, or (ii) the amount that would be payable to such holder upon conversion of its Notes at the Valuation Cap price per share, in each case payable concurrently with or immediately prior to the consummation of such Change of Control transaction.

(d) Most Favored Nation Provision. The Notes will include a most favored nation clause providing that, in the event the Company issues any subsequent convertible promissory notes, Simple Agreements for Future Equity ("SAFEs"), or other convertible instruments on terms that are more favorable to the holders thereof than the terms of the Notes, the holders of the Notes shall have the right to elect to have the terms of their Notes adjusted to incorporate such more favorable terms.

The Company anticipates pursuing a planned Series D preferred equity financing round in Q3 or Q4 of 2024, which, if consummated at or above the Qualified Financing threshold, would trigger the automatic conversion of the Notes as described above. The bridge financing is intended to provide the Company with sufficient runway and working capital to execute on its business plan and position the Company for a successful Series D process.

3. Identification of the Purchaser Syndicate

The Notes will be purchased by the following syndicate of investors, each of which has executed the term sheet for the proposed transaction:

The term sheet for the proposed transaction was executed by all parties on December 4, 2023. A copy of the executed term sheet is enclosed herewith for your reference.

4. Closing Structure

The proposed transaction is expected to close in two tranches, as follows:

(a) Initial Closing. The initial closing (the "Initial Closing") is anticipated to fund Forty-Five Million Dollars ($45,000,000) in aggregate proceeds to the Company. The Initial Closing contributions are expected to be allocated as follows: Ridgeline Ventures Fund IV, L.P. ($30,000,000), Beacon Hill Capital Partners, LLC ($10,000,000), and Halcyon Growth Equity, L.P. ($5,000,000). The Initial Closing is anticipated to occur on or about January 15, 2024, subject to the satisfaction or waiver of customary closing conditions, including, without limitation, the receipt of the lender consent and waiver that is the subject of this letter.

(b) Final Closing. The final closing (the "Final Closing") is anticipated to fund the remaining Fifteen Million Dollars ($15,000,000) in aggregate proceeds. The Final Closing contributions are expected to be allocated as follows: Beacon Hill Capital Partners, LLC ($5,000,000, representing the balance of its aggregate commitment) and Northstar Innovation Fund II, L.P. ($10,000,000). The Final Closing is expected to occur within thirty (30) to sixty (60) days following the Initial Closing.

Funds from each Purchaser will be deposited into and held in escrow with Granite Trust Company, N.A. (Escrow Account No. 4401-7829-SBF), and will be released to the Company upon satisfaction of the applicable closing conditions set forth in the Note Purchase Agreement, including receipt of the requisite consents described in this letter. The terms of the escrow arrangement will be governed by a separate Escrow Agreement to be entered into among the Company, the Purchasers, and Granite Trust Company, N.A. as escrow agent.

5. Subordination of the Notes

Skybridge hereby acknowledges and confirms that the Notes, including all principal, accrued interest, and any other amounts payable thereunder, will be fully subordinated in right of payment and priority to all existing and future indebtedness, obligations, and liabilities of the Company arising under or in connection with the Loan Agreement with Kelvantis. The Company understands and agrees that the senior position of Kelvantis under the Loan Agreement must be fully preserved, and the proposed transaction has been structured with this principle as a foundational consideration.

To formalize this subordination, the Company intends to execute, and to cause each of the Purchasers to execute, a Subordination Agreement (the "Subordination Agreement") among Kelvantis (as the senior lender), the Purchasers (as subordinated noteholders), and Skybridge (as the borrower and issuer), on terms and conditions acceptable to Kelvantis in its reasonable discretion. An initial draft of the Subordination Agreement is currently being prepared by this firm and will be circulated to Kelvantis and its counsel for review and comment promptly following the date of this letter.

The Subordination Agreement is expected to address, among other matters, the following key subordination provisions:

(a) Payment Subordination. No payments of principal, interest, or any other amounts shall be made on the Notes during the continuance of any Event of Default or default under the Loan Agreement, or if such payment would cause or give rise to an Event of Default or default under the Loan Agreement.

(b) Lien Subordination. The Notes will not be secured by any lien, security interest, or encumbrance on any assets of the Company, and the holders of the Notes will not seek or obtain any such lien, security interest, or encumbrance. Kelvantis's first-priority security interest in the Collateral (as defined in the Loan Agreement) will remain unimpaired and undisturbed.

(c) Enforcement Standstill. The holders of the Notes will agree to a standstill period during which they will refrain from exercising any remedies or enforcement actions with respect to the Notes, including the commencement of any legal proceedings, for a specified period following the occurrence of a default under the Notes, in order to permit Kelvantis to exercise its rights and remedies under the Loan Agreement.

(d) Turnover Provisions. In the event that any holder of Notes receives any payment or distribution in respect of the Notes in contravention of the subordination provisions, such holder will be required to promptly turn over and deliver such payment or distribution to Kelvantis for application to the obligations outstanding under the Loan Agreement.

For the avoidance of doubt, the Notes will not be secured by any of the Company's assets. The Purchasers will not receive any lien, security interest, mortgage, pledge, or other encumbrance on any property or assets of the Company in connection with the proposed transaction.

6. Specific Consents and Waivers Requested

On behalf of the Company, we respectfully request the following specific consents and waivers from Kelvantis in connection with the proposed transaction:

6.1 Consent to Additional Indebtedness

We request Kelvantis's consent under the Loan Agreement to the incurrence by the Company of subordinated convertible note indebtedness in the aggregate principal amount of Sixty Million Dollars ($60,000,000), as described in this letter. Section 7.4 of the Loan Agreement (Negative Covenants — Additional Indebtedness) restricts the Company from incurring, creating, assuming, or permitting to exist any indebtedness other than Permitted Indebtedness (as defined in Section 1.1 of the Loan Agreement) without the prior written consent of the Lender. The issuance of the Notes would constitute Indebtedness (as defined in the Loan Agreement) that is not within the scope of the definition of Permitted Indebtedness. Accordingly, Kelvantis's affirmative consent under Section 7.4 is required for the Company to consummate the proposed transaction without triggering a violation of the Loan Agreement.

6.2 Waiver of Any Resulting Default or Event of Default

We request that Kelvantis waive any default or Event of Default under the Loan Agreement that would arise solely as a result of the issuance of the Notes and the execution and delivery of the related transaction documents, including the Note Purchase Agreement, the form of Convertible Promissory Note, the Subordination Agreement, the Escrow Agreement, and any amendments to the Company's existing investor agreements as described in Section 6.4 below. For the avoidance of doubt, this requested waiver is limited in scope solely to any default or Event of Default arising directly from the consummation of the proposed transaction as described herein, and the Company does not request and does not intend to request any general waiver of Kelvantis's rights, remedies, or protections under the Loan Agreement. The Company acknowledges that any such waiver, if granted, shall not be deemed a waiver of any other provision of the Loan Agreement or of any future default or Event of Default, whether or not similar in nature.

6.3 Consent to Subordination Agreement

We request Kelvantis's consent to enter into the Subordination Agreement as the senior lender party thereto, on terms to be agreed upon by the parties. As noted in Section 5 above, a draft of the Subordination Agreement will be provided to Kelvantis and its counsel for review and comment in advance of execution. The Company anticipates that Kelvantis may have comments or modifications to the draft Subordination Agreement and welcomes such input to ensure the final agreement is acceptable to all parties.

6.4 Consent to Related Transaction Documents

In addition to the consents described above, we request Kelvantis's consent to the execution and delivery by the Company of the following related transaction documents in connection with the proposed convertible note bridge financing:

(a) The Note Purchase Agreement, by and among the Company and the Purchasers, governing the issuance and sale of the Notes;

(b) The form of Convertible Promissory Note, evidencing the Company's obligations to each Purchaser;

(c) An amendment to the Company's Amended and Restated Investors' Rights Agreement, dated as of July 15, 2021, to add the Purchasers as parties thereto and to grant customary information and registration rights in connection with the conversion of the Notes;

(d) An amendment to the Company's Right of First Refusal and Co-Sale Agreement, dated as of July 15, 2021, to add the Purchasers as parties thereto; and

(e) The Escrow Agreement, by and among the Company, the Purchasers, and Granite Trust Company, N.A., as escrow agent, governing the deposit, holding, and release of funds in connection with the closing of the transaction.

To the extent that the execution and delivery of any of the foregoing documents would require the consent of Kelvantis under the Loan Agreement, or would otherwise give rise to a default or Event of Default thereunder, we respectfully request that Kelvantis provide its consent to such execution and delivery and waive any such resulting default or Event of Default.

7. Company Financial Overview

To assist Kelvantis in its evaluation of this consent request, we provide the following brief summary of the Company's current financial position and operating metrics:

• Annual Recurring Revenue (ARR) as of Q3 2023: approximately $78,000,000

• Annualized Gross Payment Volume: approximately $4,200,000,000

• Net Revenue Retention: 128%

• Cash and Cash Equivalents on Hand (pre-bridge): approximately $18,500,000

• Monthly Cash Burn Rate: approximately $4,800,000

• Projected Cash and Cash Equivalents (post-bridge, assuming full funding): approximately $78,500,000

• Post-Bridge Implied Cash Runway: approximately 16.4 months (at current burn rate)

• Employee Headcount: approximately 310 full-time equivalents (FTEs)

The Company's audited financial statements for the fiscal year ended December 31, 2022, and its reviewed financial statements for the quarter ended September 30, 2023 (Q3 2023), both prepared by Pinnacle Audit Group LLP (engagement partner: Lisa Johannsen, CPA), are available upon request. We will promptly provide these materials to Kelvantis should they be required in connection with Kelvantis's evaluation of this consent request.

The Company's most recent independent valuation under Section 409A of the Internal Revenue Code was prepared by Atlas Valuation Services, Inc. and is dated September 15, 2023. That valuation determined the fair market value of the Company's common stock to be Eight Dollars and Forty-Two Cents ($8.42) per share as of the valuation date.

As noted above, the bridge financing is intended to extend the Company's operating runway and provide additional working capital to support the Company's growth trajectory in anticipation of the planned Series D equity financing round, which the Company's management and board of directors expect to pursue in Q3 or Q4 of 2024. The Company's management believes that the bridge financing will strengthen the Company's financial position and creditworthiness, which in turn supports the Company's ability to meet its obligations under the Loan Agreement through and beyond the maturity date.

8. Company's Continued Compliance with Loan Agreement

The Company hereby confirms that, except as specifically disclosed in this letter (and solely with respect to any default or Event of Default that may arise from the consummation of the proposed transaction without the consent and waiver of Kelvantis as described herein), the Company is in full compliance with all covenants, terms, conditions, and obligations under the Loan Agreement as of the date hereof.

The Company further confirms that, to the best of its knowledge and as of the date of this letter, no Event of Default, default, or condition or event that, with the giving of notice, the lapse of time, or both, would constitute an Event of Default under the Loan Agreement currently exists, other than as may arise from the proposed transaction if consummated without the lender consent and waiver that is the subject of this letter.

The Company's obligations under the Loan Agreement, including the outstanding principal balance of Fifteen Million Dollars ($15,000,000) and all other amounts due and payable thereunder, with a stated maturity date of August 15, 2025, will remain unmodified, unimpaired, and in full force and effect following the consummation of the proposed transaction. The proposed transaction is not intended to, and will not, alter, amend, modify, or otherwise affect Kelvantis's rights, remedies, security interests, or priority position under the Loan Agreement.

9. Requested Timing and Form of Consent

The Company anticipates executing the Note Purchase Agreement and consummating the Initial Closing on or about mid-January 2024. In order to accommodate this anticipated closing timeline and to permit the orderly closing of the transaction, we respectfully request that Kelvantis deliver its written consent and waiver on or before January 10, 2024.

We suggest that the consent and waiver take the form of a letter agreement or consent letter executed by a duly authorized representative of Kelvantis, in which Kelvantis provides the specific consents and waivers described in Section 6 of this letter. To facilitate the process, this firm will prepare and circulate to Kelvantis (and to Kelvantis's counsel, if Kelvantis so directs) a draft form of consent letter for Kelvantis's review, comment, and execution. We are, of course, open to any alternative format or structure for the consent that Kelvantis may prefer.

We recognize that Kelvantis may wish to discuss any aspect of this request, and we welcome the opportunity to address any questions, concerns, or requested modifications to the proposed form of consent at Kelvantis's earliest convenience. We are available to meet in person at Kelvantis's offices or to arrange a call at a time that is convenient for you and your colleagues.

10. Offer to Provide Additional Information

The Company and this firm are prepared to provide any additional documentation, information, or diligence materials that Kelvantis may require in connection with its evaluation of this consent request. We are committed to working cooperatively with Kelvantis to ensure that Kelvantis has all information necessary to make an informed determination.

Without limitation, we specifically offer to provide the following upon Kelvantis's request:

(a) The executed term sheet for the proposed transaction, dated December 4, 2023 (a copy of which is enclosed with this letter);

(b) Drafts of the Note Purchase Agreement and form of Convertible Promissory Note, initial drafts of which were circulated among the Company and the Purchasers on December 11, 2023;

(d) The Company's audited financial statements for FY 2022 and reviewed financial statements for Q3 2023;

(e) The Company's most recent board-approved operating budget and financial projections; and

(f) Any other financial, legal, or operational information that Kelvantis may reasonably request in connection with its review.

For purposes of correspondence and communications relating to this consent request, please direct all inquiries to the undersigned:

Leonard Ashford, Esq. Of Counsel, Emerging Companies & Venture Capital Calderwood & Harkness LLP 600 Lexington Avenue New York, New York 10022 Telephone: (212) 554-7148

Email: lashford@calderwoodharkness.com

You may also contact the Company's General Counsel directly:

Priya Ramanathan, Esq. General Counsel Skybridge Fintech Ltd. 1400 Market Street, Suite 2200 Wilmington, Delaware 19801 Telephone: (302) 555-4200

Email: pramanathan@skybridgefintech.com

11. Reservation of Rights / No Waiver

This letter and any consent or waiver delivered by Kelvantis in response hereto shall not constitute a waiver, modification, or amendment of any provision of the Loan Agreement other than as specifically and expressly set forth in such consent or waiver instrument. All rights, remedies, powers, and privileges of Kelvantis under the Loan Agreement, under any related loan document, and at law or in equity are fully reserved and shall remain in full force and effect, except to the extent expressly waived or modified in writing by Kelvantis in connection with this specific transaction. Nothing in this letter or in any consent or waiver granted in connection herewith shall be construed as establishing a course of dealing, custom, or practice between the parties, or as obligating Kelvantis to grant any consent or waiver in connection with any future transaction or request.

We sincerely appreciate Kelvantis's prompt attention to this request and its continued partnership with the Company. The timely receipt of Kelvantis's consent is of significant importance to the Company's financing timeline and to the Company's ability to consummate the proposed bridge financing on the terms described herein. We are confident that the proposed transaction, structured as fully subordinated convertible note indebtedness, supports the long-term financial health and creditworthiness of the Company and is consistent with Kelvantis's interests as the Company's senior secured lender.

Please do not hesitate to contact us if you have any questions or if there is any additional information we can provide. We look forward to hearing from you.

Very truly yours,

CALDERWOOD & HARKNESS LLP

By: ________

Leonard Ashford Of Counsel Emerging Companies & Venture Capital Calderwood & Harkness LLP 600 Lexington Avenue New York, New York 10022 Telephone: (212) 554-7148

Email: lashford@calderwoodharkness.com

Enclosures:

1. Executed Term Sheet, dated December 4, 2023

2. Draft Note Purchase Agreement (circulated December 11, 2023)

3. Draft Form of Convertible Promissory Note (circulated December 11, 2023)

4. Draft Schedule of Purchasers

cc: (via email)

Arjun Mehta, Chief Executive Officer & Co-Founder, Skybridge Fintech Ltd. David Lindstrom, Chief Financial Officer, Skybridge Fintech Ltd. Priya Ramanathan, General Counsel, Skybridge Fintech Ltd. Victoria Chambers, Responsible Partner, Calderwood & Harkness LLP Nina Reyes, Senior Associate, Calderwood & Harkness LLP

Purchaser	Entity Type	Commitment ($)	Percentage of Round	Relationship
Ridgeline Ventures Fund IV, L.P.	Delaware limited partnership	$30,000,000	50.00%	Lead Investor; existing investor via affiliated fund (Ridgeline Ventures Fund III, L.P., which co-led the Company's Series C round in July 2021)
Beacon Hill Capital Partners, LLC	Delaware limited liability company	$15,000,000	25.00%	Co-Investor; existing Series C investor
Northstar Innovation Fund II, L.P.	Delaware limited partnership	$10,000,000	16.67%	New Investor
Halcyon Growth Equity, L.P.	Delaware limited partnership	$5,000,000	8.33%	Existing investor; led the Company's Series B round
Total	$60,000,000	100.00%

CALDERWOOD & HARKNESS LLP Attorneys at Law
600 Lexington Avenue New York, New York 10022
Telephone: (212) 554-7000 Facsimile: (212) 554-7001 www.calderwoodharkness.com
December 15, 2023
VIA EMAIL AND OVERNIGHT COURIER
Theodore "Ted" Marsh Relationship Manager Kelvantis Lending Corp. 350 Park Avenue, 18th Floor New York, New York 10022
Re: Request for Lender Consent and Waiver under Loan and Security Agreement, dated August 15, 2022, by and between Kelvantis Lending Corp. and Skybridge Fintech Ltd. — Proposed Convertible Note Bridge Financing
Dear Mr. Marsh:
1. Introduction and Representation
This firm represents Skybridge Fintech Ltd., a corporation organized and existing under the laws of the State of Delaware ("Skybridge" or the "Company"), Employer Identification Number 83-2147605, Delaware Division of Corporations File Number 6384291, with its principal office located at 1400 Market Street, Suite 2200, Wilmington, Delaware 19801. We write to you in our capacity as outside counsel to the Company in connection with the matters described herein. This matter is being handled under Calderwood & Harkness LLP Matter No. 1009-00001.
As you are aware, Kelvantis Lending Corp. ("Kelvantis" or the "Lender") and Skybridge are parties to that certain Loan and Security Agreement, dated as of August 15, 2022 (as amended, restated, supplemented, or otherwise modified from time to time, the "Loan Agreement"), pursuant to which Kelvantis extended a venture debt facility to Skybridge. As of the date of this letter, the aggregate outstanding principal amount under the Loan Agreement is Fifteen Million Dollars ($15,000,000), with a stated maturity date of August 15, 2025. All capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in the Loan Agreement unless the context otherwise requires.
The purpose of this letter is to respectfully request, on behalf of the Company, Kelvantis's consent and waiver under certain provisions of the Loan Agreement in connection with a proposed convertible note bridge financing that Skybridge intends to consummate in early 2024. As described more fully below, the Company has received commitments from a syndicate of existing and new investors for an aggregate of Sixty Million Dollars ($60,000,000) in subordinated convertible promissory notes. We believe this transaction represents a significant positive development for the Company and, by extension, is supportive of Kelvantis's interests as the Company's senior secured lender. We respectfully request Kelvantis's consideration and approval of this transaction as set forth herein.
2. Description of the Proposed Transaction
Skybridge proposes to issue convertible promissory notes (collectively, the "Notes") in an aggregate principal amount of Sixty Million Dollars ($60,000,000) to a syndicate of existing and new investors (the "Purchasers"), pursuant to a Note Purchase Agreement to be entered into by and among the Company and the Purchasers (the "Note Purchase Agreement"). A summary of the principal terms of the proposed transaction is set forth below.
The Notes will bear simple interest at a rate of six percent (6.00%) per annum (600 basis points), calculated on the basis of a 365-day year and actual days elapsed. Based on the full principal amount of $60,000,000, the annual interest accrual on the Notes will be Three Million Six Hundred Thousand Dollars ($3,600,000). Interest on the Notes will accrue from and including the applicable closing date and will not be payable in cash prior to maturity or conversion, except as otherwise provided in the Notes.
The Notes will mature twenty-four (24) months from the date of the initial closing (the "Maturity Date"). Based on the anticipated initial closing date of January 15, 2024, the anticipated Maturity Date would be January 15, 2026. We note for Kelvantis's reference that this anticipated Maturity Date falls approximately five (5) months after the August 15, 2025 maturity date of the existing facility under the Loan Agreement.
The Notes contain the following conversion mechanics:
(a) Automatic Conversion upon Qualified Financing. The Notes will automatically convert into equity securities of the Company upon the consummation of a Qualified Financing, which is defined as a Series D preferred equity financing in which the Company raises at least Eighty Million Dollars ($80,000,000) in new equity capital (excluding the conversion of the Notes and any other convertible securities). Upon a Qualified Financing, the Notes will convert at a conversion price per share equal to the lower of (i) a twenty percent (20%) discount to the per-share price paid by the new investors in the Series D round, or (ii) the per-share price implied by a pre-money valuation cap of Seven Hundred Fifty Million Dollars ($750,000,000) (the "Valuation Cap"). Based on the Company's approximately 48,500,000 fully diluted shares outstanding on a pre-bridge basis, the price per share implied by the Valuation Cap is approximately Fifteen Dollars and Forty-Six Cents ($15.46).
(b) Optional Conversion or Repayment at Maturity. In the event that no Qualified Financing occurs prior to the Maturity Date, each holder of Notes may, at its election, either (i) convert the outstanding principal amount of its Notes, together with all accrued and unpaid interest thereon, into equity securities of the Company at a price per share equal to the Valuation Cap price, or (ii) demand repayment of the outstanding principal amount of its Notes, together with all accrued and unpaid interest thereon, in cash.
(c) Change of Control Provision. In the event of a Change of Control of the Company (as defined in the form of Note), each holder of Notes shall be entitled to receive, at the Company's election, the greater of (i) two times (2.0x) the outstanding principal amount of such holder's Notes, together with all accrued and unpaid interest thereon, or (ii) the amount that would be payable to such holder upon conversion of its Notes at the Valuation Cap price per share, in each case payable concurrently with or immediately prior to the consummation of such Change of Control transaction.
(d) Most Favored Nation Provision. The Notes will include a most favored nation clause providing that, in the event the Company issues any subsequent convertible promissory notes, Simple Agreements for Future Equity ("SAFEs"), or other convertible instruments on terms that are more favorable to the holders thereof than the terms of the Notes, the holders of the Notes shall have the right to elect to have the terms of their Notes adjusted to incorporate such more favorable terms.
The Company anticipates pursuing a planned Series D preferred equity financing round in Q3 or Q4 of 2024, which, if consummated at or above the Qualified Financing threshold, would trigger the automatic conversion of the Notes as described above. The bridge financing is intended to provide the Company with sufficient runway and working capital to execute on its business plan and position the Company for a successful Series D process.
3. Identification of the Purchaser Syndicate
The Notes will be purchased by the following syndicate of investors, each of which has executed the term sheet for the proposed transaction:
The term sheet for the proposed transaction was executed by all parties on December 4, 2023. A copy of the executed term sheet is enclosed herewith for your reference.
4. Closing Structure
The proposed transaction is expected to close in two tranches, as follows:
(a) Initial Closing. The initial closing (the "Initial Closing") is anticipated to fund Forty-Five Million Dollars ($45,000,000) in aggregate proceeds to the Company. The Initial Closing contributions are expected to be allocated as follows: Ridgeline Ventures Fund IV, L.P. ($30,000,000), Beacon Hill Capital Partners, LLC ($10,000,000), and Halcyon Growth Equity, L.P. ($5,000,000). The Initial Closing is anticipated to occur on or about January 15, 2024, subject to the satisfaction or waiver of customary closing conditions, including, without limitation, the receipt of the lender consent and waiver that is the subject of this letter.
(b) Final Closing. The final closing (the "Final Closing") is anticipated to fund the remaining Fifteen Million Dollars ($15,000,000) in aggregate proceeds. The Final Closing contributions are expected to be allocated as follows: Beacon Hill Capital Partners, LLC ($5,000,000, representing the balance of its aggregate commitment) and Northstar Innovation Fund II, L.P. ($10,000,000). The Final Closing is expected to occur within thirty (30) to sixty (60) days following the Initial Closing.
Funds from each Purchaser will be deposited into and held in escrow with Granite Trust Company, N.A. (Escrow Account No. 4401-7829-SBF), and will be released to the Company upon satisfaction of the applicable closing conditions set forth in the Note Purchase Agreement, including receipt of the requisite consents described in this letter. The terms of the escrow arrangement will be governed by a separate Escrow Agreement to be entered into among the Company, the Purchasers, and Granite Trust Company, N.A. as escrow agent.
5. Subordination of the Notes
Skybridge hereby acknowledges and confirms that the Notes, including all principal, accrued interest, and any other amounts payable thereunder, will be fully subordinated in right of payment and priority to all existing and future indebtedness, obligations, and liabilities of the Company arising under or in connection with the Loan Agreement with Kelvantis. The Company understands and agrees that the senior position of Kelvantis under the Loan Agreement must be fully preserved, and the proposed transaction has been structured with this principle as a foundational consideration.
To formalize this subordination, the Company intends to execute, and to cause each of the Purchasers to execute, a Subordination Agreement (the "Subordination Agreement") among Kelvantis (as the senior lender), the Purchasers (as subordinated noteholders), and Skybridge (as the borrower and issuer), on terms and conditions acceptable to Kelvantis in its reasonable discretion. An initial draft of the Subordination Agreement is currently being prepared by this firm and will be circulated to Kelvantis and its counsel for review and comment promptly following the date of this letter.
The Subordination Agreement is expected to address, among other matters, the following key subordination provisions:
(a) Payment Subordination. No payments of principal, interest, or any other amounts shall be made on the Notes during the continuance of any Event of Default or default under the Loan Agreement, or if such payment would cause or give rise to an Event of Default or default under the Loan Agreement.
(b) Lien Subordination. The Notes will not be secured by any lien, security interest, or encumbrance on any assets of the Company, and the holders of the Notes will not seek or obtain any such lien, security interest, or encumbrance. Kelvantis's first-priority security interest in the Collateral (as defined in the Loan Agreement) will remain unimpaired and undisturbed.
(c) Enforcement Standstill. The holders of the Notes will agree to a standstill period during which they will refrain from exercising any remedies or enforcement actions with respect to the Notes, including the commencement of any legal proceedings, for a specified period following the occurrence of a default under the Notes, in order to permit Kelvantis to exercise its rights and remedies under the Loan Agreement.
(d) Turnover Provisions. In the event that any holder of Notes receives any payment or distribution in respect of the Notes in contravention of the subordination provisions, such holder will be required to promptly turn over and deliver such payment or distribution to Kelvantis for application to the obligations outstanding under the Loan Agreement.
For the avoidance of doubt, the Notes will not be secured by any of the Company's assets. The Purchasers will not receive any lien, security interest, mortgage, pledge, or other encumbrance on any property or assets of the Company in connection with the proposed transaction.
6. Specific Consents and Waivers Requested
On behalf of the Company, we respectfully request the following specific consents and waivers from Kelvantis in connection with the proposed transaction:
6.1 Consent to Additional Indebtedness
We request Kelvantis's consent under the Loan Agreement to the incurrence by the Company of subordinated convertible note indebtedness in the aggregate principal amount of Sixty Million Dollars ($60,000,000), as described in this letter. Section 7.4 of the Loan Agreement (Negative Covenants — Additional Indebtedness) restricts the Company from incurring, creating, assuming, or permitting to exist any indebtedness other than Permitted Indebtedness (as defined in Section 1.1 of the Loan Agreement) without the prior written consent of the Lender. The issuance of the Notes would constitute Indebtedness (as defined in the Loan Agreement) that is not within the scope of the definition of Permitted Indebtedness. Accordingly, Kelvantis's affirmative consent under Section 7.4 is required for the Company to consummate the proposed transaction without triggering a violation of the Loan Agreement.
6.2 Waiver of Any Resulting Default or Event of Default
We request that Kelvantis waive any default or Event of Default under the Loan Agreement that would arise solely as a result of the issuance of the Notes and the execution and delivery of the related transaction documents, including the Note Purchase Agreement, the form of Convertible Promissory Note, the Subordination Agreement, the Escrow Agreement, and any amendments to the Company's existing investor agreements as described in Section 6.4 below. For the avoidance of doubt, this requested waiver is limited in scope solely to any default or Event of Default arising directly from the consummation of the proposed transaction as described herein, and the Company does not request and does not intend to request any general waiver of Kelvantis's rights, remedies, or protections under the Loan Agreement. The Company acknowledges that any such waiver, if granted, shall not be deemed a waiver of any other provision of the Loan Agreement or of any future default or Event of Default, whether or not similar in nature.
6.3 Consent to Subordination Agreement
We request Kelvantis's consent to enter into the Subordination Agreement as the senior lender party thereto, on terms to be agreed upon by the parties. As noted in Section 5 above, a draft of the Subordination Agreement will be provided to Kelvantis and its counsel for review and comment in advance of execution. The Company anticipates that Kelvantis may have comments or modifications to the draft Subordination Agreement and welcomes such input to ensure the final agreement is acceptable to all parties.
6.4 Consent to Related Transaction Documents
In addition to the consents described above, we request Kelvantis's consent to the execution and delivery by the Company of the following related transaction documents in connection with the proposed convertible note bridge financing:
(a) The Note Purchase Agreement, by and among the Company and the Purchasers, governing the issuance and sale of the Notes;
(b) The form of Convertible Promissory Note, evidencing the Company's obligations to each Purchaser;
(c) An amendment to the Company's Amended and Restated Investors' Rights Agreement, dated as of July 15, 2021, to add the Purchasers as parties thereto and to grant customary information and registration rights in connection with the conversion of the Notes;
(d) An amendment to the Company's Right of First Refusal and Co-Sale Agreement, dated as of July 15, 2021, to add the Purchasers as parties thereto; and
(e) The Escrow Agreement, by and among the Company, the Purchasers, and Granite Trust Company, N.A., as escrow agent, governing the deposit, holding, and release of funds in connection with the closing of the transaction.
To the extent that the execution and delivery of any of the foregoing documents would require the consent of Kelvantis under the Loan Agreement, or would otherwise give rise to a default or Event of Default thereunder, we respectfully request that Kelvantis provide its consent to such execution and delivery and waive any such resulting default or Event of Default.
7. Company Financial Overview
To assist Kelvantis in its evaluation of this consent request, we provide the following brief summary of the Company's current financial position and operating metrics:
• Annual Recurring Revenue (ARR) as of Q3 2023: approximately $78,000,000
• Annualized Gross Payment Volume: approximately $4,200,000,000
• Net Revenue Retention: 128%
• Cash and Cash Equivalents on Hand (pre-bridge): approximately $18,500,000
• Monthly Cash Burn Rate: approximately $4,800,000
• Projected Cash and Cash Equivalents (post-bridge, assuming full funding): approximately $78,500,000
• Post-Bridge Implied Cash Runway: approximately 16.4 months (at current burn rate)
• Employee Headcount: approximately 310 full-time equivalents (FTEs)
The Company's audited financial statements for the fiscal year ended December 31, 2022, and its reviewed financial statements for the quarter ended September 30, 2023 (Q3 2023), both prepared by Pinnacle Audit Group LLP (engagement partner: Lisa Johannsen, CPA), are available upon request. We will promptly provide these materials to Kelvantis should they be required in connection with Kelvantis's evaluation of this consent request.
The Company's most recent independent valuation under Section 409A of the Internal Revenue Code was prepared by Atlas Valuation Services, Inc. and is dated September 15, 2023. That valuation determined the fair market value of the Company's common stock to be Eight Dollars and Forty-Two Cents ($8.42) per share as of the valuation date.
As noted above, the bridge financing is intended to extend the Company's operating runway and provide additional working capital to support the Company's growth trajectory in anticipation of the planned Series D equity financing round, which the Company's management and board of directors expect to pursue in Q3 or Q4 of 2024. The Company's management believes that the bridge financing will strengthen the Company's financial position and creditworthiness, which in turn supports the Company's ability to meet its obligations under the Loan Agreement through and beyond the maturity date.
8. Company's Continued Compliance with Loan Agreement
The Company hereby confirms that, except as specifically disclosed in this letter (and solely with respect to any default or Event of Default that may arise from the consummation of the proposed transaction without the consent and waiver of Kelvantis as described herein), the Company is in full compliance with all covenants, terms, conditions, and obligations under the Loan Agreement as of the date hereof.
The Company further confirms that, to the best of its knowledge and as of the date of this letter, no Event of Default, default, or condition or event that, with the giving of notice, the lapse of time, or both, would constitute an Event of Default under the Loan Agreement currently exists, other than as may arise from the proposed transaction if consummated without the lender consent and waiver that is the subject of this letter.
The Company's obligations under the Loan Agreement, including the outstanding principal balance of Fifteen Million Dollars ($15,000,000) and all other amounts due and payable thereunder, with a stated maturity date of August 15, 2025, will remain unmodified, unimpaired, and in full force and effect following the consummation of the proposed transaction. The proposed transaction is not intended to, and will not, alter, amend, modify, or otherwise affect Kelvantis's rights, remedies, security interests, or priority position under the Loan Agreement.
9. Requested Timing and Form of Consent
The Company anticipates executing the Note Purchase Agreement and consummating the Initial Closing on or about mid-January 2024. In order to accommodate this anticipated closing timeline and to permit the orderly closing of the transaction, we respectfully request that Kelvantis deliver its written consent and waiver on or before January 10, 2024.
We suggest that the consent and waiver take the form of a letter agreement or consent letter executed by a duly authorized representative of Kelvantis, in which Kelvantis provides the specific consents and waivers described in Section 6 of this letter. To facilitate the process, this firm will prepare and circulate to Kelvantis (and to Kelvantis's counsel, if Kelvantis so directs) a draft form of consent letter for Kelvantis's review, comment, and execution. We are, of course, open to any alternative format or structure for the consent that Kelvantis may prefer.
We recognize that Kelvantis may wish to discuss any aspect of this request, and we welcome the opportunity to address any questions, concerns, or requested modifications to the proposed form of consent at Kelvantis's earliest convenience. We are available to meet in person at Kelvantis's offices or to arrange a call at a time that is convenient for you and your colleagues.
10. Offer to Provide Additional Information
The Company and this firm are prepared to provide any additional documentation, information, or diligence materials that Kelvantis may require in connection with its evaluation of this consent request. We are committed to working cooperatively with Kelvantis to ensure that Kelvantis has all information necessary to make an informed determination.
Without limitation, we specifically offer to provide the following upon Kelvantis's request:
(a) The executed term sheet for the proposed transaction, dated December 4, 2023 (a copy of which is enclosed with this letter);
(b) Drafts of the Note Purchase Agreement and form of Convertible Promissory Note, initial drafts of which were circulated among the Company and the Purchasers on December 11, 2023;
(c) The draft Subordination Agreement, which is currently being prepared by this firm and will be circulated promptly;
(d) The Company's audited financial statements for FY 2022 and reviewed financial statements for Q3 2023;
(e) The Company's most recent board-approved operating budget and financial projections; and
(f) Any other financial, legal, or operational information that Kelvantis may reasonably request in connection with its review.
For purposes of correspondence and communications relating to this consent request, please direct all inquiries to the undersigned:
Leonard Ashford, Esq. Of Counsel, Emerging Companies & Venture Capital Calderwood & Harkness LLP 600 Lexington Avenue New York, New York 10022 Telephone: (212) 554-7148
Email: lashford@calderwoodharkness.com
You may also contact the Company's General Counsel directly:
Priya Ramanathan, Esq. General Counsel Skybridge Fintech Ltd. 1400 Market Street, Suite 2200 Wilmington, Delaware 19801 Telephone: (302) 555-4200
Email: pramanathan@skybridgefintech.com
11. Reservation of Rights / No Waiver
This letter and any consent or waiver delivered by Kelvantis in response hereto shall not constitute a waiver, modification, or amendment of any provision of the Loan Agreement other than as specifically and expressly set forth in such consent or waiver instrument. All rights, remedies, powers, and privileges of Kelvantis under the Loan Agreement, under any related loan document, and at law or in equity are fully reserved and shall remain in full force and effect, except to the extent expressly waived or modified in writing by Kelvantis in connection with this specific transaction. Nothing in this letter or in any consent or waiver granted in connection herewith shall be construed as establishing a course of dealing, custom, or practice between the parties, or as obligating Kelvantis to grant any consent or waiver in connection with any future transaction or request.
We sincerely appreciate Kelvantis's prompt attention to this request and its continued partnership with the Company. The timely receipt of Kelvantis's consent is of significant importance to the Company's financing timeline and to the Company's ability to consummate the proposed bridge financing on the terms described herein. We are confident that the proposed transaction, structured as fully subordinated convertible note indebtedness, supports the long-term financial health and creditworthiness of the Company and is consistent with Kelvantis's interests as the Company's senior secured lender.
Please do not hesitate to contact us if you have any questions or if there is any additional information we can provide. We look forward to hearing from you.
Very truly yours,
CALDERWOOD & HARKNESS LLP
By: ________
Leonard Ashford Of Counsel Emerging Companies & Venture Capital Calderwood & Harkness LLP 600 Lexington Avenue New York, New York 10022 Telephone: (212) 554-7148
Email: lashford@calderwoodharkness.com
Enclosures:
1. Executed Term Sheet, dated December 4, 2023
2. Draft Note Purchase Agreement (circulated December 11, 2023)
3. Draft Form of Convertible Promissory Note (circulated December 11, 2023)
4. Draft Schedule of Purchasers
cc: (via email)
Arjun Mehta, Chief Executive Officer & Co-Founder, Skybridge Fintech Ltd. David Lindstrom, Chief Financial Officer, Skybridge Fintech Ltd. Priya Ramanathan, General Counsel, Skybridge Fintech Ltd. Victoria Chambers, Responsible Partner, Calderwood & Harkness LLP Nina Reyes, Senior Associate, Calderwood & Harkness LLP
Purchaser | Entity Type | Commitment ($) | Percentage of Round | Relationship
Ridgeline Ventures Fund IV, L.P. | Delaware limited partnership | $30,000,000 | 50.00% | Lead Investor; existing investor via affiliated fund (Ridgeline Ventures Fund III, L.P., which co-led the Company's Series C round in July 2021)
Beacon Hill Capital Partners, LLC | Delaware limited liability company | $15,000,000 | 25.00% | Co-Investor; existing Series C investor
Northstar Innovation Fund II, L.P. | Delaware limited partnership | $10,000,000 | 16.67% | New Investor
Halcyon Growth Equity, L.P. | Delaware limited partnership | $5,000,000 | 8.33% | Existing investor; led the Company's Series B round
Total | $60,000,000 | 100.00%

CALDERWOOD & HARKNESS LLP Attorneys at Law

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