ProSomnus Holdings Inc. announced that it has entered into a non-binding Term Sheet co-led by funds and accounts managed or advised by Cohanzick Management, LLC and CrossingBridge Management, LLC for the private placement of senior and junior secured convertible notes for gross proceeds of $30,000,000 on May 6, 2022. Cohanzick and CrossingBridge will agree to fund $17,142,857 in aggregate principal amount of senior secured convertible notes, consisting of aggregate cash to purchaser of $15,000,000 and an original issue discount of $2,142,857. The placement agents will use their best efforts to place $16,666,667 in aggregate principal amount of secured convertible notes, consisting of aggregate cash to Purchaser of $15,000,000 and an OID of $1,666,667 the junior debt.

The interest on the senior debt will accrue and be paid quarterly at the rate of 9% per annum in cash based on a 365-day year. Unless earlier converted, redeemed or repurchased, all principal, together with accrued and unpaid interest under the senior debt will be due and payable 36 months after the issuance date. The repayment will not be amortized.

Prior to the senior debt maturity date, the holders of the senior debt may, at their sole discretion, elect to convert the senior debt into purchaser common stock. Initially, the conversion price will be $13per share. The senior debt conversion price will be subject to reset to the lower of a 5% premium to the market price of purchaser common stock 6 months and 12 months after the closing, subject to $5.50 per share floor.

Upon closing, the holders of the senior debt shall receive warrants of purchaser with 10% warrant coverage and an exercise price equal to $11.50 per share. The senior debt warrants will be exercisable for a period of 5 years from the closing. Interest on the junior debt shall accrue on all outstanding principal amounts at the rate of prime + 6.50% per annum, payable quarterly at the election of purchaser.

The date of maturity of the junior debt shall occur on the latter of the 40th month anniversary from the closing, or 120 days after the maturity of the senior debt. The repayment of the junior debt will not be amortized. Prior to the maturity date, each holder of junior debt may, at its sole discretion, elect to convert the junior debt into purchaser common stock.

Initially, the conversion price will be of $11.50 per share. The junior debt conversion price will be subject to reset to the lower of a 5% premium to the market price of purchaser common stock 6 months and 12 months after closing subject to $4.50 per share floor. Upon closing of the junior debt, the holders shall receive warrants of purchaser with 100% warrant coverage and an exercise price equal to $20 per share.

The junior debt warrants will be exercisable for a period of 10 years from the closing. Cohanzick agrees and is obligated to backstop the $15,000,000 of Junior Debt to the extent the Placement Agents are not able to place the full $15,000,000. Cohanzick Management, LLC will receive 90,000 purchaser common stock from the placement agents that are otherwise due to the placement agents as part of their placement agent fee on the junior debt.

The closing of the junior debt shall be subject to closing conditions customary for debt facilities and transactions of this type.