Standby Equity Purchase Agreement Overview This section introduces the Standby Equity Purchase Agreement, outlining the terms for the Company to sell common stock to the Investor Agreement Introduction This Standby Equity Purchase Agreement, dated July 9, 2025, is between ESS TECH, INC. (the "Company") and YA II PN, LTD. (the "Investor"), granting the Company the right to sell, and obligating the Investor to purchase, up to $25 million of the Company's common stock, registered under Form S-3 Key Agreement Terms | Term | Details | | :--- | :--- | | Agreement Date | July 9, 2025 | | Company | ESS TECH, INC. (Delaware corporation, NYSE: GWH) | | Investor | YA II PN, LTD. (Cayman Islands exempt limited company) | | Commitment Amount | Up to $25 million of Common Shares | | Registration | Form S-3 (File No. 333-268138) | - As consideration for the Investor's commitment, the Company will issue Commitment Shares to the Investor2 Article I: Certain Definitions This article defines key capitalized terms used throughout the agreement for consistent interpretation Definitions This article states that capitalized terms used throughout the agreement are defined in Annex I or as otherwise specified within the document - Capitalized terms used in the agreement have meanings defined in Annex I or elsewhere within the agreement4 Article II: Advances This article details the mechanics, limitations, and closing procedures for the Company's share sales to the Investor Section 2.01: Advances Mechanics This section outlines the process for the Company to sell shares to the Investor through "Advances," allowing the Company to issue an "Advance Notice" for purchase, subject to ownership caps, registration limits, and exchange rules, with the Company able to set a minimum acceptable price - The Company has the right, but not the obligation, to sell shares to the Investor by delivering an Advance Notice during the Commitment Period6 Advance Limitations | Limitation Type | Description | | :--- | :--- | | Ownership Limitation | The Investor's beneficial ownership cannot exceed 4.99% of the Company's outstanding shares | | Registration Limitation | The number of shares in an Advance cannot exceed the number of shares registered under the effective Registration Statement | | Exchange Cap | The aggregate number of shares issued under the agreement cannot exceed 2,566,333 (19.99% of outstanding shares as of the effective date), unless shareholder approval is obtained or the average sale price is at least $1.48 per share | - The Company can specify a Minimum Acceptable Price in an Advance Notice; Trading Days where the VWAP is below this price are considered "Excluded Days," reducing the number of shares in the advance and excluding that day from the price calculation11 - Upon the Investor's receipt of a valid Advance Notice, the parties are deemed to have entered into an unconditional and binding contract for the purchase and sale of the shares11 Section 2.02: Closings This section details the closing procedures for each Advance, where the Investor provides a Settlement Document specifying the final number of shares and purchase price, followed by the Company's share transfer and the Investor's fund wire, ensuring shares are delivered without restrictive legends under an effective registration statement - On each Advance Date, the Investor delivers a Settlement Document to the Company detailing the final terms of the purchase, including the number of shares, Market Price, and total proceeds12 - The Company must electronically transfer the Advance Shares to the Investor's account promptly after receiving the Settlement Document, and the Investor must pay the aggregate purchase price promptly upon notification of the share transfer12 - If a Material Outside Event or Black Out Period occurs during the Pricing Period, the pending Advance ends, and the number of shares to be purchased is limited to the number of shares the Investor has already sold during that period12 Section 2.03: Hardship This section addresses the consequences if the Company fails to perform its obligations after an Advance Notice is received, requiring the Company to hold the Investor harmless against resulting losses and acknowledging the Investor's right to seek specific performance - If the Company defaults on its obligations after an Advance Notice, it must indemnify the Investor for any resulting loss, claim, damage, or expense, including legal fees13 - The Investor is entitled to seek an injunction and specific performance to prevent breaches by the Company and enforce the terms of the agreement13 Section 2.04: Completion of Resale This section specifies that once the Investor has purchased and resold the full Commitment Amount, it will notify the Company, at which point the Company is no longer obligated to maintain the effectiveness of the Registration Statement - After the Investor purchases and resells the full Commitment Amount, it will notify the Company, relieving the Company of its obligation to maintain an effective Registration Statement14 Article III: Representations and Warranties of the Investor This article outlines the Investor's representations regarding its legal standing, financial sophistication, and compliance Investor Representations The Investor provides several representations and warranties to the Company, confirming its legal standing, authority to enter the agreement, financial sophistication, status as an Accredited Investor, compliance with securities laws, non-affiliate status, and absence of prior short sales of the Company's stock - The Investor is a duly organized entity with the authority to enter into and perform its obligations under the agreement16 - The Investor is an "Accredited Investor" as defined in Rule 501(a)(3) of Regulation D20 - The Investor is acquiring the shares for its own account and investment purposes, not for public distribution, except as permitted by a registration statement or exemption19 - The Investor confirms it has not engaged in any short sales of the Company's securities during the period from first contact about the investment until the execution of the agreement23 Article IV: Representations and Warranties of the Company This article details the Company's extensive representations concerning its corporate status, SEC filings, and financial health Company Representations The Company makes extensive representations and warranties to the Investor, covering its corporate organization, authorization for the agreement, compliance with laws, accuracy of SEC filings and financial statements, and its capital structure, along with intellectual property, litigation, and tax status, assuring the Investor of its good standing and the validity of the shares - The Company and its subsidiaries are duly organized, in good standing, and have the authority to conduct their business26 - The Company has the corporate power to enter into the agreement and issue the shares, and the agreement constitutes a legal, valid, and binding obligation27 - The Company's SEC filings are timely, complete, and do not contain any untrue statements of a material fact or omit material facts30 - The Company is eligible to use Form S-3 for the registration of the shares, and the Registration Statement is effective without any stop orders32 Equity Capitalization (as of agreement date) | Security Type | Authorized | Outstanding | | :--- | :--- | :--- | | Capital Stock | 1.2 billion | N/A | | Common Stock | 1 billion | 12,896,146 | | Preferred Stock | 200 million | 0 | - The Company confirms it has not entered into any Variable Rate Transactions and that the issuance of shares under this agreement will not trigger any anti-dilution provisions in other securities37 - The Company and its subsidiaries are not subject to any sanctions by OFAC or other authorities and will not use the proceeds from the sale of shares in violation of sanctions laws5859 Article V: Indemnification This article establishes mutual indemnification obligations for both the Company and the Investor against specified liabilities Indemnification Obligations This article establishes mutual indemnification obligations, where the Company indemnifies the Investor against losses from untrue statements or omissions in registration documents or breaches of Company representations, and the Investor indemnifies the Company for losses from false information provided for registration or breaches of Investor representations - The Company will indemnify the Investor and its affiliates ("Investor Indemnitees") against liabilities arising from untrue statements or material omissions in the Registration Statement or Prospectus, or from any material breach of the Company's representations or covenants6263 - The Investor will indemnify the Company and its affiliates ("Company Indemnitees") against liabilities arising from untrue statements or omissions based on written information furnished by the Investor for use in the registration documents, or from any breach of the Investor's representations or covenants64 - The article outlines specific procedures for making indemnification claims, including prompt written notice and the right of the indemnifying party to assume control of the defense6566 Article VI: Covenants This article outlines the ongoing obligations of both the Company and the Investor during the Commitment Period Mutual Covenants This article details the ongoing obligations of both the Company and the Investor during the Commitment Period, including the Company's requirements to maintain an effective registration statement, keep common stock listed, and disclose material information, and the Investor's restrictions on short selling, along with procedures for Black Out Periods and use of proceeds - The Company must maintain the effectiveness of the Registration Statement at all times during the Commitment Period and file necessary reports and prospectus supplements with the SEC71 - The Company may suspend the use of the Registration Statement during a "Black Out Period" if necessary to amend the prospectus, but such periods cannot exceed 20 days73 - The Company must keep its common shares listed on the Principal Market (NYSE) and will file all required Exchange Act reports in a timely manner7577 - The Investor covenants not to engage in any short sales of the Company's common stock during the Restricted Period, with specific exceptions for selling shares it is unconditionally obligated to purchase under a pending Advance Notice91 - The Company agrees not to provide the Investor with material non-public information without the Investor's prior written consent and will publicly disclose any such information provided8593 - The agreement specifies that under the current Form S-3 registration, only $6.64 million of shares can be offered and sold; any sales above this amount would require a new registration statement96 Article VII: Non-Exclusive Agreement This article clarifies that the agreement is non-exclusive, allowing the Company to pursue other financing options Non-Exclusivity This article clarifies that the agreement is non-exclusive, allowing the Company to retain the right to issue and sell other shares, securities, or convertible instruments to other parties at any time - The agreement is non-exclusive, allowing the Company to pursue other financing and issue other securities to third parties without restriction98 Article VIII: Governing Law and Jurisdiction This article establishes the legal framework, governing law, and jurisdiction for disputes arising from the agreement Legal Framework This article establishes the legal framework for the agreement, specifying that it will be governed by New York State laws, with legal actions heard in New York County, and both parties waiving their right to a jury trial for any disputes - The agreement is governed by the laws of the State of New York100 - The parties consent to the jurisdiction of courts in New York County, New York for any legal proceedings100 - Both parties explicitly waive their right to a trial by jury in any legal proceeding related to the agreement101 Article IX: Termination This article outlines the conditions and procedures for the termination of the agreement by either party Termination Clauses This article outlines the conditions under which the agreement can be terminated, including automatic termination after 36-month or full Commitment Amount purchase, and the Company's right to terminate with five trading days' notice, with indemnification obligations surviving termination - The agreement automatically terminates on the earlier of the 36-month anniversary of the Effective Date or the date the full Commitment Amount is purchased106 - The Company may terminate the agreement with five trading days' written notice, provided no Advance Notices are outstanding and all amounts owed to the Investor have been paid106 - Liability for any breach occurring before termination and the indemnification provisions in Article V survive the termination of the agreement106 Article X: Notices This article specifies the formal communication procedures and contact information for both parties Communication Procedures This article specifies the procedures for formal communication between the parties, requiring all notices to be in writing and deemed delivered upon receipt, and providing specific contact information and addresses for both the Company and the Investor - All notices, consents, and waivers must be in writing and delivered personally, by email, certified mail, or a national overnight service to the addresses specified in the agreement105107 Article XI: Miscellaneous This article includes standard miscellaneous clauses and details the commitment and structuring fees payable by the Company Miscellaneous Provisions This article contains standard miscellaneous clauses, including provisions for counterparts, the entire agreement clause, and brokerage representations, and details the commitment and structuring fees payable by the Company to the Investor, which include a cash reimbursement for costs and a commitment fee paid in common shares Commitment and Structuring Fees | Fee Type | Amount/Calculation | | :--- | :--- | | Cost Reimbursement | $85,000 in cash, payable on the earlier of the first Advance or 30 days from the agreement date | | Commitment Fee | 1.00% of the Commitment Amount ($250,000), payable in Common Shares; 50% is issued on the Effective Date, and the remaining 50% is issued on the earlier of a new registration filing or 60 days from the Effective Date | - The agreement can be executed in counterparts, and electronic signatures are considered valid109110 - This agreement supersedes all prior oral or written agreements between the parties on this matter111 Annexes and Exhibits This section provides supplementary documents, including definitions, conditions precedent, and official forms for transactions Annex I: Definitions Annex I provides a comprehensive list of definitions for the capitalized terms used throughout the Standby Equity Purchase Agreement, ensuring clarity and consistent interpretation of the contract's language - Defines key terms such as "Commitment Amount" ($25 million), "Market Price" (lowest daily VWAP during the Pricing Period), and "Purchase Price" (97% of the Market Price)126131138 - Specifies the "Pricing Period" as the three consecutive Trading Days starting on the Advance Notice Date135 Annex II: Conditions Precedent to Advances Annex II lists the conditions that must be satisfied or waived before the Company has the right to deliver an Advance Notice to the Investor, ensuring the Company is in good standing and compliance at the time of each requested share purchase - The Company's representations and warranties must be true and correct146 - The Registration Statement must be effective, and the Company must be current with its SEC filings146 - There must be no trading suspension of the Company's common shares, and the shares must remain listed on the Principal Market147 - No Material Outside Event shall have occurred and be continuing146 Exhibit A: Advance Notice Form Exhibit A provides the official template for the Advance Notice that the Company must use to request the Investor to purchase shares, requiring certification that all conditions are met and specifying the number of shares requested - This is the standardized form the Company must use to initiate an Advance148 - The form requires the Company to state the number of Advance Shares requested and the total number of common shares outstanding151152 Exhibit B: Settlement Document Form Exhibit B is the template for the Settlement Document, which the Investor provides to the Company to finalize an Advance, detailing the calculation of the final number of shares and total purchase price, and providing the Investor's account information for share delivery - This form is used by the Investor to communicate the final settlement details of an Advance to the Company155 - The document outlines the calculation of the total purchase price, accounting for the Market Price, Purchase Price (97% of Market Price), and any adjustments for Excluded Days156157 - It includes the Investor's DTC participant and account information for the electronic transfer of shares158
ESS Tech(GWH) - 2025 Q2 - Quarterly Results