Form 8-K American Virtual Cloud For: Dec 01

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of report (Date of earliest event reported): December 1, 2020

 

American Virtual Cloud Technologies, Inc.
(Exact Name of registrant as Specified in Charter)

 

Delaware		001-38167		81-2402421
(State or other jurisdiction		(Commission File Number)		(IRS Employer
of incorporation)				Identification No.)

 

1720 Peachtree Street, Suite 629
Atlanta, GA		30309
(Address of principal executive offices)		(Zip code)

 

(404) 234-3098
(Registrant’s telephone number, including area code)

 

Not Applicable
(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

☐

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.0001 per share		AVCT		The Nasdaq Stock Market LLC
Warrants, each whole warrant exercisable for one share of Common Stock at an exercise price of $11.50		AVCTW		The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2).

 

Emerging growth company  ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 

Item 1.01. Entry into a Material Definitive Agreement.

 

Amended and Restated Purchase Agreement

 

Effective as of December 1, 2020 (the “Closing Date”), American Virtual Cloud Technologies, Inc. (“AVCT” or the “Company”) entered into an Amended and Restated Purchase Agreement (the “A&R Purchase Agreement”) with Ribbon Communications Inc. (“Ribbon”), Ribbon Communications Operating Company, Inc. (“RCOCI”) and Ribbon Communications International Limited (together with RCOCI, the “Sellers”, and together with Ribbon, the “Ribbon Parties”), and consummated the transactions contemplated by the A&R Purchase Agreement (the “Closing”). The A&R Purchase Agreement amends and restates in its entirety the Purchase Agreement entered into on August 5, 2020, by AVCT and the Ribbon Parties (the “Original Purchase Agreement”), which Original Purchase Agreement was described in the Current Report on Form 8-K filed by AVCT on August 11, 2020.  At the Closing, AVCT purchased the Sellers’ cloud-based enterprise services business (also known as the Kandy Communications business) (the “Business”) by acquiring certain of the Sellers’ and their respective affiliates’ assets (and assuming certain of the Sellers’ and their respective affiliates’ liabilities) primarily associated with the Business, and acquiring all of the outstanding interests of Kandy Communications LLC (the “Transaction”).

 

The A&R Purchase Agreement revised the Original Purchase Agreement by, among other things, changing the consideration payable by AVCT to Ribbon from 13.0 million shares of AVCT’s common stock (“Common Stock”) to $45.0 million, subject to certain adjustments, in the form of units of AVCT’s securities (“Units”), each Unit consisting of (i) $1,000 in principal amount of AVCT’s Series A-1 convertible debentures (the “Debentures”) and (ii) a warrant to purchase 100 shares of Common Stock at an exercise price of $0.01 per whole share (the “Warrants”). At the Closing, AVCT issued to Ribbon Debentures with an aggregate original principal amount of approximately $43.8 million and Warrants exercisable for 4,377,800 shares of Common Stock.

 

The Debentures bear interest at a rate of 10% per annum, accruing quarterly on the last day of each calendar quarter and added to the principal amount of the Debentures, except upon maturity in which case accrued and unpaid interest is payable in cash. The entire principal amount of each Debenture, together with accrued and unpaid interest thereon, is due and payable on the earlier of (i) such date, commencing on or after June 1, 2023, as the holder thereof, at its sole option, upon not less than 30 days’ prior written notice to the Company, demands payment thereof and (ii) the occurrence of a Change in Control (as defined in the Debentures). Each Debenture is convertible, in whole or in part, at any time at the option of the holder thereof into that number of shares of Common Stock calculated by dividing the principal amount being converted, together with all accrued but unpaid interest thereon, by the applicable conversion price, initially $3.45. The conversion price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and is also subject to price-based adjustment, on a “full ratchet” basis, in the event of any issuances of Common Stock, or securities convertible, exercisable or exchangeable for, Common Stock at a price below the then-applicable conversion price (subject to certain exceptions). The Debentures are subject to mandatory conversion if the closing price of the Common Stock exceeds $6.00 for any 40 trading days within a consecutive 60 trading day-period, subject to the satisfaction of certain other conditions. The Debentures are subordinated to all Senior Indebtedness (as defined in the Debentures), including indebtedness under the Credit Agreement (as defined below).

 

 

Pursuant to the terms of the Debentures, at the Closing AVCT’s subsidiaries issued to the holders of the Debentures a Guaranty (the “Guaranty”), pursuant to which such subsidiaries jointly and severally guaranteed the obligations of AVCT under the Debentures.

 

Under the A&R Purchase Agreement, the Company is required to take certain specified efforts to seek stockholder approval, for purposes of Nasdaq listing rules, of the issuance of more than 20% of the Company’s outstanding Common Stock (the “Stockholder Approval”). Until such Stockholder Approval is received, the terms of the Debentures and Warrants limit the number of shares of Common Stock into which the Debentures and Warrants (together with any Debentures and Warrants issued pursuant to the PIPE (as defined below)) can be converted to no more than 19.9% of either the number of shares of Common Stock outstanding on the Closing Date or the total voting power of the Company’s securities outstanding on the Closing Date that are entitled to vote on a matter voted on by holders of Common Stock.

 

The foregoing descriptions of the A&R Purchase Agreement, the Debentures, the Warrants and the Guaranty do not purport to be complete and are qualified in their entireties by reference to the full text of the A&R Purchase Agreement, the form of Debenture, the form of Warrant and the form of Guaranty, which are filed as Exhibits 2.1, 4.1, 4.2 and 10.1, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

 

Amended and Restated Voting Agreement

 

Simultaneously with the execution of the A&R Purchase Agreement, the Ribbon Parties entered into Amended and Restated Voting Agreements (the “A&R Voting Agreements”) with each of Pensare Sponsor Group, LLC and Stratos Management Systems Holdings, LLC, each of which is a greater than 5% stockholder of the Company (each, a “Significant Stockholder”). The Significant Stockholders hold in the aggregate approximately 70% of AVCT’s outstanding shares of Common Stock. Pursuant to the A&R Voting Agreements, each Significant Stockholder has agreed, with respect to all of the voting securities of AVCT that such Significant Stockholder beneficially owns as of the date thereof or thereafter, to vote in favor of the Stockholder Approval. The A&R Voting Agreements will terminate upon the Company obtaining the Stockholder Approval.

 

The foregoing description of the A&R Voting Agreements does not purport to be complete and is qualified in its entirety by reference to the full text of the A&R Voting Agreements, which are filed as Exhibit 10.2 and Exhibit 10.3 to this Current Report on Form 8-K and are incorporated herein by reference.

 

 

Investor Rights Agreement

 

Simultaneously with the execution of the A&R Purchase Agreement, AVCT, Ribbon and the Significant Stockholders entered into an Investor Rights Agreement (the “Investor Rights Agreement”). Pursuant to the terms of the Investor Rights Agreement, Ribbon received customary registration rights with respect to the shares of Common Stock underlying the Debentures and Warrants issued to Ribbon. In addition, under the Investor Rights Agreement, so long as Ribbon holds an amount of shares of Common Stock equal to at least 25% of the total number of shares of Common Stock issuable upon conversion of Debentures issued to Ribbon at the Closing (or Debentures convertible in the aggregate into such amount) (the “Minimum Shares”), Ribbon will have the right to nominate one director to the AVCT board of directors. If Ribbon holds the Minimum Shares and does not exercise its right to nominate one director, Ribbon will have the right to designate a board observer. The Investor Rights Agreement also provides that each of the Significant Stockholders will agree to support AVCT’s obligation to nominate and have elected Ribbon’s director nominee.

 

The Investor Rights Agreement also provides that if AVCT consummates the sale of $50.0 million or more in Units in the PIPE by May 24, 2021, then Ribbon will have the right to elect to have up to five million of its Units repurchased by AVCT for a purchase price of $1,000 per Unit (provided that if less than $55.0 million in Units is sold in the PIPE by such date, the maximum number of Units that AVCT would be obligated to repurchase would be equal to the difference between the number of Units sold in the PIPE and fifty thousand).

 

The foregoing description of the Investor Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the A&R Purchase Agreement, which is filed as Exhibit 10.4 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Securities Purchase Agreement

 

Also on the Closing Date, AVCT entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) pursuant to which SPAC Opportunity Partners Investment Sub LLC (the “Initial Investor”) purchased, in a private placement on the Closing Date, 10,000 Units for an aggregate purchase price of $10.0 million, and AVCT may sell up to an additional 50,000 Units in one or more additional closings on or before May 24, 2021 (collectively, the “PIPE”). The Initial Investor, which is an affiliate of Lawrence Mock, the Chairman of AVCT’s Board of Directors and a significant stockholder of the Company, agreed that if the total number of Units sold pursuant to the Securities Purchase Agreement as of such date is less than 35,000, it will purchase such number of additional Units as is necessary to result in AVCT selling a total of 35,000 Units pursuant to the Securities Purchase Agreement, subject to customary closing conditions. The Debentures and Warrants issued and issuable pursuant to the Securities Purchase Agreement are substantially the same as those issued to Ribbon pursuant to the A&R Purchase Agreement, and the Company’s obligations under the Debentures issued pursuant to the Securities Purchase Agreement are guaranteed by AVCT’s subsidiaries pursuant to a Guaranty in the same form as the Guaranty issued to Ribbon.

 

Simultaneously with the execution of the Securities Purchase Agreement, AVCT, certain of the other parties to the Registration Rights Agreement, dated as of April 7, 2020 (the “Registration Rights Agreement”), to which AVCT is a party, and the Initial Investor entered into an amendment and joinder to the Registration Rights Agreement (the “RRA Amendment”), pursuant to which the Initial Investor was added as an additional “Holder” under the Registration Rights Agreement (and any additional investors under the Securities Purchase Agreement will be added as additional Holders thereunder) and the shares of Common Stock underlying the Debentures and Warrants issued and issuable pursuant to the terms of the Securities Purchase Agreement were added to the definition of “Registrable Securities” under the Registration Rights Agreement.

 

 

The foregoing descriptions of the Securities Purchase Agreement and the RRA Amendment do not purport to be complete and are qualified in their entireties by reference to the full text of the Securities Purchase Agreement and RRA Amendment, which are filed as Exhibits 10.5 and 10.6, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

 

Sixth Amendment to Loan Documents

 

Also on the Closing Date, AVCT, the subsidiaries of AVCT and Comerica Bank (“Comerica”) entered into a Sixth Amendment to Loan Documents (the “Sixth Amendment”). The Sixth Amendment added certain new subsidiaries of AVCT as guarantors under the Credit Agreement, dated December 18, 2017 (as amended, the “Credit Agreement”), to which AVCT and Comerica are parties, and otherwise amended certain provisions of the Credit Agreement and related loan documents to permit the consummation of the transactions contemplated by the A&R Purchase Agreement and the Securities Purchase Agreement.

 

The foregoing description of the Sixth Amendment does not purport to be complete and is qualified in its entirety by the terms and conditions of the Sixth Amendment, which is filed as Exhibit 10.7 to this Current Report on Form 8-K and is incorporated herein by reference.

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

The disclosure set forth under the heading “Amended and Restated Purchase Agreement” in Item 1.01 above is incorporated in this Item 2.01 by reference.

 

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

 

The disclosure set forth in the second paragraph under the heading “Investor Rights Agreement” in Item 1.01 above is incorporated in this Item 2.01 by reference.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The information set forth under the headings “Amended and Restated Purchase Agreement” and “Securities Purchase Agreement” in Item 1.01 of this Current Report on Form 8-K is incorporated in this Item 3.02 by reference. The issuance and sale of securities pursuant to the A&R Purchase Agreement and the Securities Purchase Agreement was (or will be, as applicable) undertaken in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) thereof. The securities issued and sold pursuant to the A&R Purchase Agreement and the Securities Purchase Agreement may not be re-offered or sold in the United States absent an effective registration statement or an exemption from the registration requirements under applicable federal and state securities laws.

 

 

Item 5.02.  Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

 

On December 7, 2020, the Company announced the appointment of Michael Dennis as Chief Operating Officer of the Company, with an effective date of December 1, 2020 (the “Effective Date”). Graham McGonigal, who had served as Chief Operating Officer, will now serve as the Company’s Chief Strategy Officer effective as of the Effective Date.

 

Mr. Dennis, age 61, is a veteran in the telecommunications and technology industries, having held leadership positions with AT&T (NYSE: T), Lucent Technologies (NYSE: ALU), and Avaya (NYSE: AVYA). Over the core of his career, he held various executive leadership positions responsible for sales, sales operations, customer service, project management, manufacturing, outsourcing, professional services, infrastructure, and digital platform management. He was a member of the Senior Leadership team that took Avaya public in 2000. In his most recent position, Michael served as the President and Chief Executive Officer of Big Green Group (“BGG”), a Cellular Telecommunication and Broadband Services provider, which received MetLife’s small business of the year award in 2016.

 

In connection with his appointment, Mr. Dennis entered into an employment agreement, effective as of the Effective Date (the “Dennis Employment Agreement”), with the Company, pursuant to which he will serve as Chief Operating Officer of the Company, on an “at-will” basis.  Mr. Dennis is entitled to receive a base salary of $420,000 per year. Mr. Dennis will also be entitled to an annual bonus for each full fiscal year during his employment term, with a target bonus amount equal to 100% of his annual base salary, subject to the achievement of performance objectives to be established by the Company each year.

 

Pursuant to the Dennis Employment Agreement, Mr. Dennis will be entitled to receive a grant of 300,000 restricted stock units under the Company’s 2020 Equity Incentive Plan, subject to approval of the Company’s board of directors.

 

 If Mr. Dennis’s employment under the Dennis Employment Agreement is terminated by the Company without “cause” (as such term is defined in the Dennis Employment Agreement), the Company will be obligated to pay to Mr. Dennis, in addition to accrued but unpaid salary and benefits, (i) continued payment of base salary for one year and (ii) continued benefits, including health care and life insurance. The Company’s obligation to pay any of the foregoing severance obligations (other than salary and benefits accrued through the date of termination of employment) would be subject to Mr. Dennis’s execution of a release of claims against the Company and Mr. Dennis’s compliance with any surviving non-competition, non-solicitation, confidentiality and assignment of inventions obligations to the Company.

 

The Dennis Employment Agreement contains customary confidentiality provisions, which apply both during and for two years after the term of the Dennis Employment Agreement, and customary non-competition and non-solicitation provisions, which apply during the term of the Dennis Employment Agreement and for one year thereafter.

 

Also effective as of the Effective Date, the Company entered into an employment agreement with Thomas King, the Company’s Chief Financial Officer (the “King Employment Agreement”), pursuant to which Mr. King will continue to serve as Chief Financial Officer of the Company, on an “at-will” basis. Mr. King is entitled to receive a base salary of $420,000 per year. Mr. King will also be entitled to an annual bonus for each full fiscal year during his employment term, with a target bonus amount equal to 100% of his annual base salary, subject to the achievement of performance objectives to be established by the Company each year. The King Employment Agreement otherwise contains substantially the same material terms as the Dennis Employment Agreement.

 

 

The foregoing descriptions of the Dennis Employment Agreement and the King Employment Agreement do not purport to be complete and are qualified in their entireties by reference to the full text of such agreements, copies of which are filed as Exhibits 10.8 and 10.9, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.

 

Item 8.01 Other Events.

 

On December 2, 2020, AVCT and Ribbon issued a joint press release announcing the consummation of the Transaction. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. Such exhibit and the information set forth therein shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act or the Exchange Act.

 

On December 7, 2020, AVCT issued a press release regarding the appointment of Mr. Dennis. A copy of the press release is furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference. Such exhibit and the information set forth therein shall not be deemed to be filed for purposes of Section 18 of the Exchange Act or otherwise be subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act or the Exchange Act.

 

Item 9.01. Financial Statements and Exhibits.

 

(a) Financial statements of the Business, as well as pro-forma financial statements, will be filed as an amendment to this Form 8-K as soon as practicable, within 75 days of the Closing Date.

 

(d) Exhibits.

 

Exhibit No.		Exhibit
2.1		Amended and Restated Purchase Agreement, dated December 1, 2020, by and among American Virtual Cloud Technologies, Inc., Ribbon Communications Inc., Ribbon Communications Operating Company, Inc. and Ribbon Communications International Limited.
4.1		Form of Debenture.
4.2		Form of Warrant.
10.1		Form of Guaranty of Debentures.
10.2		Amended and Restated Voting Agreement, dated December 1, 2020, by and among Ribbon Communications Inc., Ribbon Communications Operating Company, Inc., Ribbon Communications International Limited and Pensare Sponsor Group, LLC.
10.3		Amended and Restated Voting Agreement, dated December 1, 2020, by and among Ribbon Communications Inc., Ribbon Communications Operating Company, Inc., Ribbon Communications International Limited and Stratos Management Systems Holdings, LLC.
10.4		Investor Rights Agreement, dated December 1, 2020, by and among American Virtual Cloud Technologies, Inc., Ribbon Communications Inc., Pensare Sponsor Group, LLC and Stratos Management Systems Holdings, LLC.
10.5		Securities Purchase Agreement, dated December 1, 2020, by and between American Virtual Cloud Technologies, Inc. and SPAC Opportunity Partners Investment Sub LLC.
10.6		Amendment and Joinder to Registration Rights Agreement, dated December 1, 2020, by and among American Virtual Cloud Technologies, Inc. and the Holders party thereto.
10.7		Sixth Amendment to Loan Documents, dated as of December 1, 2020.
10.8		Employment Agreement, dated December 1, 2020, between American Virtual Cloud Technologies, Inc. and Michael Dennis.
10.9		Employment Agreement, dated December 2, 2020, between American Virtual Cloud Technologies, Inc. and Thomas King.
99.1		Press release, dated December 2, 2020.
99.2		Press release, dated December 7, 2020.

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.

 

	AMERICAN VIRTUAL CLOUD TECHNOLOGIES
	By:	/s/ Thomas H. King
		Name:	Thomas H. King
		Title:	Chief Financial Officer

 

Date: December 7, 2020

 

7

Exhibit 2.1

 

Execution Version

 

 

 

 

 

 

 

AMENDED AND RESTATED PURCHASE AGREEMENT

 

among

 

RIBBON COMMUNICATIONS INC.,

 

RIBBON COMMUNICATIONS OPERATING COMPANY, INC.,

 

RIBBON COMMUNICATIONS INTERNATIONAL LIMITED

 

and

 

AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC.

 

dated as of December 1, 2020

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

ARTICLE I DEFINITIONS		2
ARTICLE II PURCHASE AND SALE		17
Section 2.01.	Purchase and Sale of the Purchased Interests	17
Section 2.02.	Purchase and Sale of Assets	17
Section 2.03.	Excluded Assets	18
Section 2.04.	Assumed Liabilities	19
Section 2.05.	Excluded Liabilities	20
Section 2.06.	Purchase Price	21
Section 2.07.	Purchase Price Adjustment	21
Section 2.08.	Allocation of Purchase Price	24
ARTICLE III CLOSING		24
Section 3.01.	Closing	24
Section 3.02.	Closing Deliverables	25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS		27
Section 4.01.	Organization and Qualification	27
Section 4.02.	Authority of Sellers	28
Section 4.03.	No Conflicts; Consents	28
Section 4.04.	Financial Statements	29
Section 4.05.	Absence of Certain Changes, Events and Conditions	29
Section 4.06.	Material Contracts	30
Section 4.07.	Transferred Assets	32
Section 4.08.	Real Property	32
Section 4.09.	Intellectual Property	32
Section 4.10.	Data Protection	34
Section 4.11.	Legal Proceedings; Governmental Orders	35
Section 4.12.	Compliance with Laws; Permits	35
Section 4.13.	Environmental Matters	35
Section 4.14.	Employee Benefit Matters	36
Section 4.15.	Employment Matters	37
Section 4.16.	Taxes	37
Section 4.17.	Accounts Receivable	38
Section 4.18.	Customers and Suppliers	38
Section 4.19.	Transactions with Affiliates	39
Section 4.20.	Brokers	39
Section 4.21.	Information Supplied	39
Section 4.22.	No Other Representations and Warranties	39
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER		40
Section 5.01.	Organization	40
Section 5.02.	Authority of Buyer	40
Section 5.03.	No Conflicts; Consents	41
Section 5.04.	Brokers	41

 

 

Section 5.05.	Legal Proceedings	41
Section 5.06.	Capitalization of Buyer	42
Section 5.07.	Absence of Certain Changes, Events and Conditions	42
Section 5.08.	SEC Reports and Financial Statements	43
Section 5.09.	Internal Controls and Procedures	44
Section 5.10.	Undisclosed Liabilities	44
Section 5.11.	Compliance with Laws; Permits	44
Section 5.12.	Information Supplied	45
Section 5.13.	Tax Matters	45
Section 5.14.	Acknowledgement by Buyer	46
Section 5.15.	No Other Representations and Warranties	46
ARTICLE VI COVENANTS		47
Section 6.01.	Employees and Employee Benefits	47
Section 6.02.	Conduct of the Business Prior to Closing	50
Section 6.03.	Notifications; Disclosure	53
Section 6.04.	Access to Information	54
Section 6.05.	Taxes	54
Section 6.06.	Confidentiality	56
Section 6.07.	Non-Competition; Non-Solicitation	57
Section 6.08.	Exclusivity	58
Section 6.09.	Litigation Support and Cooperation	59
Section 6.10.	Public Announcements	59
Section 6.11.	Post-Signing Contracts	60
Section 6.12.	Approvals and Consents	60
Section 6.13.	Shared Contracts	62
Section 6.14.	Transition Services Agreement	62
Section 6.15.	PIPE Equity Offering	63
Section 6.16.	Audit of Business	63
Section 6.17.	Receivables	63
Section 6.18.	Transfer of Domain Names	64
Section 6.19.	Cooperation Regarding Onboarding	64
Section 6.20.	Further Assurances	64
Section 6.21.	Stock Exchange Listing	64
Section 6.22.	Proxy Statement	64
Section 6.23.	Buyer Stockholder Meeting	65
Section 6.24.	Post-Closing Access	66
Section 6.25.	Post-Closing Asset Transfers	66
Section 6.26.	SEC Reports	67
Section 6.27.	Seller Marks	67
Section 6.28.	Warranty Claims	67
Section 6.29.	Mexico Subleased Property	68
Section 6.30.	Software Reseller Agreement	68
ARTICLE VII CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES		68
Section 7.01.	Conditions to Each Party’s Obligation	68
Section 7.02.	Conditions to Obligation of Buyer	68
Section 7.03.	Conditions to Obligation of Sellers	69

 

 

ARTICLE VIII INDEMNIFICATION		70
Section 8.01.	Survival	70
Section 8.02.	Indemnification by Sellers	71
Section 8.03.	Indemnification by Buyer	71
Section 8.04.	Certain Limitations	71
Section 8.05.	Indemnification Procedures	73
Section 8.06.	Tax Treatment of Indemnification Payments	74
Section 8.07.	Mitigation; Insurance	74
Section 8.08.	Cooperation; Access to Documents and Information	75
Section 8.09.	Exclusive Remedies	75
Section 8.10.	Manner of Payment	75
ARTICLE IX TERMINATION		76
Section 9.01.	Termination	76
Section 9.02.	Effect of Termination	77
Section 9.03.	Termination Fee	77
ARTICLE X MISCELLANEOUS		78
Section 10.01.	Expenses	78
Section 10.02.	Notices	78
Section 10.03.	Interpretation	79
Section 10.04.	Headings	79
Section 10.05.	Severability	79
Section 10.06.	Entire Agreement	79
Section 10.07.	Successors and Assigns	80
Section 10.08.	No Third Party Beneficiaries	80
Section 10.09.	Amendment and Modification; Waiver	80
Section 10.10.	Remedies	80
Section 10.11.	Governing Law; Venue; Waiver of Jury Trial	81
Section 10.12.	Specific Performance	81
Section 10.13.	Waiver of Conflicts	82
Section 10.14.	Counterparts	82
Section 10.15.	Bulk Sales Laws	82

 

EXHIBITS:

 

Exhibit A	-	Example Net Working Capital Statement
Exhibit B	-	Bill of Sale
Exhibit C	-	Assignment and Assumption Agreement
Exhibit D	-	Terms of Sublease Agreement
Exhibit E	-	Intellectual Property Assignment Agreements
Exhibit F-1	-	Seller Patent License Agreement
Exhibit F-2	-	Buyer Patent License Agreement
Exhibit G	-	Seller Software License Agreement
Exhibit H	-	Buyer Software License Agreement
Exhibit I	-	Transition Services Agreement
Exhibit J	-	Investor Rights Agreement
Exhibit K	-	Amended and Restated Voting Agreement
Exhibit L	-	Form of Debentures
Exhibit M	-	Form of Warrant
Exhibit N		Terms of Software Reseller Agreement

 

 

AMENDED AND RESTATED PURCHASE AGREEMENT

 

This Amended and Restated Purchase Agreement (this “Agreement”), dated as of December 1, 2020, is entered into by and among Ribbon Communications Inc., a Delaware corporation (“Parent”), Ribbon Communications Operating Company, Inc., a Delaware corporation (“RCOCI”), Ribbon Communications International Limited, an Ireland company (“RCIL”, and together with RCOCI, each a “Seller” and collectively the “Sellers”), and American Virtual Cloud Technologies, Inc., a Delaware corporation (“Buyer”). Sellers and Buyer are sometimes hereinafter individually referred to as a “Party” and collectively referred to as the “Parties”.

 

RECITALS

 

WHEREAS, Sellers and certain of their Affiliates, including Kandy Communications LLC (the “Purchased Subsidiary”), a wholly-owned Subsidiary of RCOCI, are engaged in the business of providing cloud-based enterprise services of UCaaS, CPaaS and CCaaS as conducted by Sellers and their respective Affiliates, not including the sale of products or services to Third Parties to enable them to engage in such business; provided that session border controllers hosted and sold as a service are not UCaaS, CPaaS or CCaaS (the “Business”);

 

WHEREAS, Sellers and their respective Affiliates wish to sell the Business by selling the Purchased Interests (as defined below) and the Transferred Assets (as defined below) and assigning the Assumed Liabilities (as defined below) to Buyer, and Buyer wishes to purchase the Purchased Interests and the Transferred Assets and assume the Assumed Liabilities from Sellers and certain of their respective Affiliates, subject to the terms and conditions set forth herein;

 

WHEREAS, the Parties had initially entered into that certain Purchase Agreement, dated as of August 5, 2020 (the “Original Agreement”);

 

WHEREAS, as a material inducement and condition to Sellers entering into the Original Agreement, certain stockholders of Buyer (the “Significant Investors”) entered into a voting and support agreement with Sellers simultaneously with the execution of the Original Agreement (the “Original Voting Agreement”);

 

WHEREAS, the Parties wish to amend and restate the Original Agreement in its entirety; and

 

WHEREAS, as a material inducement and condition to Sellers entering into this Agreement, the Significant Investors have agreed to amend and restate the Voting Agreement simultaneously with the execution of this Agreement, substantially in the form attached hereto as Exhibit K (the “Voting Agreement”), pursuant to which, among other things, such Significant Investors have agreed, upon the terms and subject to the conditions set forth therein, to vote in favor of the issuance of shares of Common Stock to Parent upon the conversion of the Debentures issuable to Parent hereunder and the exercise of the Warrants issuable to Parent hereunder, in each case in accordance with the terms thereof.

 

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

ARTICLE I

DEFINITIONS

 

The following terms have the meanings specified or referred to in this Article I:

 

“2020 Bonus Plan” has the meaning set forth in Section 6.01(g).

 

“Accounting Firm” has the meaning set forth in Section 2.07(d).

 

“Acquisition Proposal” has the meaning set forth in Section 6.08(b).

 

“Affiliate” means, with respect to any specified Person, any other Person that directly or indirectly, through one or more intermediaries, controls or is controlled by or is under common control with such Person, in each case from time to time; provided, with respect to Parent and Sellers, in no event shall J.P. Morgan Securities PLC or Swarth Group Inc. be deemed Affiliates of Parent or Sellers. The term “control” (including its correlative meanings “controlled by” and “under common control with”) means the possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise).

 

“Agreement” has the meaning set forth in the preamble.

 

“Allocation Notice of Objection” has the meaning set forth in Section 2.07(a).

 

“Allocation Schedule” has the meaning set forth in Section 2.07(a).

 

“Ancillary Agreements” means (i) the Bill of Sale, (ii) the Assignment and Assumption Agreement, (iii) the Sublease Agreement, (iv) the Intellectual Property Assignment Agreements, (v) the License Agreements, (vi) the Transition Services Agreement, and (vii) Investor Rights Agreement, and the other agreements, instruments and documents required to be delivered at the Closing.

 

“Assignment and Assumption Agreement” has the meaning set forth in Section 3.02(a)(ii).

 

“Assumed Liabilities” has the meaning set forth in Section 2.04.

 

“Balance Sheet” has the meaning set forth in Section 4.04(a).

 

“Benefit Plan” means each employee benefit plan (within the meaning of Section 3(3) of ERISA, whether or not subject thereto), and each other employee benefit or compensatory plan, program, contract, policy, practice, agreement or arrangement, whether or not in writing and whether or not funded, in each case, sponsored or maintained, and/or contributed to by Sellers or their respective Affiliates (as determined immediately prior to the date of the Original Agreement) and which (i) provides compensation and/or benefits to any Business Employee, including any employment, consulting, retirement, severance, termination or change in control agreements, and any plans or agreements providing for deferred compensation, equity-based incentives, bonuses, supplemental retirement, profit sharing, medical, welfare, vacation or material fringe benefits or other material employee benefits or remuneration of any kind, or (ii) Buyer or any of its Affiliates could have any Liabilities under due to its status as an ERISA Affiliate of any Seller or any of its Affiliates, but excluding (a) any plan, program, agreement or arrangement required by applicable Law or regulation (e.g., government mandated severance plans) and (b) any Multiemployer Plan.

 

 

“Benefits Continuation Period” has the meaning set forth in Section 6.01(b).

 

“Bonus Adjustment Amount” has the meaning set forth in Section 6.01(g).

 

“Bill of Sale” has the meaning set forth in Section 3.02(a)(i).

 

“Business Audit” has the meaning set forth in Section 6.16.

 

“Business Day” means any day other than a Saturday, Sunday or day on which banks are closed in New York, New York and in Texas. If any period expires on a day which is not a Business Day or any event or condition is required by the terms of this Agreement to occur or be fulfilled on a day which is not a Business Day, such period shall expire or such event or condition shall occur or be fulfilled, as the case may be, on the next succeeding Business Day.

 

“Business Dispute” has the meaning set forth in Section 10.13.

 

“Business Employees” means those Persons employed by Sellers or their respective Subsidiaries who work for the Business and are identified on Schedule 1.01(a) (as may be updated from time to time by Sellers prior to the Closing, subject to Section 6.02).

 

“Buyer” has the meaning set forth in the preamble.

 

“Buyer 401(k) Plan” has the meaning set forth in Section 6.01(h).

 

“Buyer Board” has the meaning set forth in Section 5.09.

 

“Buyer Board Recommendation” has the meaning set forth in Section 5.02(b).

 

“Buyer Disclosure Schedules” means the disclosure schedules to the Agreement delivered by Buyer to Sellers.

 

“Buyer Financial Statements” has the meaning set forth in Section 5.08(b).

 

“Buyer Fundamental Representations” means the representations and warranties in Sections 5.01 (Organization), 5.02 (Authority of Buyer), 5.04 (Brokers) and 5.06 (Capitalization of Buyer).

 

“Buyer Hiring Date” means January 1, 2021; provided that with respect to all Non-NA Business Employees, “Buyer Hiring Date” shall mean February 15, 2021.

 

 

“Buyer Indemnitees” has the meaning set forth in Section 8.02(a).

 

“Buyer Material Adverse Effect” means an event, development, circumstance, change or effect that has, individually or in the aggregate, a materially adverse effect on (a) the assets, Liabilities, results of operations or financial condition of the business of Buyer, taken as a whole or (b) the ability of Buyer to timely consummate the transactions contemplated by this Agreement; provided, however, that “Buyer Material Adverse Effect” shall not include any event, occurrence, fact, condition, or change, directly or indirectly, arising out of or attributable to: (i) any changes, conditions or effects in the United States economies or securities or financial markets in general; (ii) conditions generally affecting the industries in which the Buyer’s business operates; (iii) national or international political or social conditions, including the engagement by the United States in hostilities or conditions caused by acts of terrorism or war (whether or not declared), or the escalation of any of the foregoing, or any act of God or national or international calamity (including any epidemics, pandemics, COVID-19 and the COVID-19 Measures); (iv) earthquakes, hurricanes, tsunamis, typhoons, lightning, hailstorms, blizzards, tornadoes, droughts, floods, cyclones, mudslides, wildfires, weather conditions and other natural disasters; (v) any change, effect or circumstance resulting from an action required or permitted by this Agreement; (vi) changes in any acceptable accounting standards applicable to the Buyer’s business interpretations thereof; (vii) any failure, in and of itself, by the Buyer’s business to meet any internal projections or forecasts, or estimates of revenue or earnings for any period; (viii) changes in Laws or other binding directives issued by any Governmental Authority, or the interpretation or enforcement thereof; or (ix) the negotiation, entry into, announcement, pendency or performance of this Agreement, the taking of any action contemplated or permitted by this Agreement and the Ancillary Agreements contemplated hereby or the taking of any action (or omission to take any action) with Sellers’ consent or at the request of Sellers, or the identity of Sellers or their respective Affiliates, including any impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors, licensors, licensees, joint venture partners or employees; provided, further, that, with respect to clauses (i) through (iv) such event, development, circumstance, change or effect will be taken into account in determining whether a Buyer Material Adverse Effect has occurred or is occurring only to the extent it disproportionately adversely affects Buyer’s business (taken as a whole) compared to other participants in the industries in which Buyer’s business operates.

 

“Buyer Plan” has the meaning set forth in Section 6.01(c).

 

“Buyer Pro-Forma Financial Statements” has the meaning set forth in Section 5.08(b).

 

“Buyer SEC Documents” has the meaning set forth in Section 5.08(a).

 

“Buyer Securities” has the meaning set forth in Section 5.06(b).

 

“Buyer Stockholder Meeting” has the meaning set forth in Section 6.23.

 

“Buyer Stock Price” as of any date of determination, means the greater of (i) VWAP of Buyer Closing Common Stock and (ii) VWAP of Buyer Common Stock.

 

“Buyer Surviving Representations” has the meaning set forth in Section 8.01(b).

 

 

“CCaaS” (also known as Contact Center as a Service) means a cloud-based customer experience solution that allows companies to utilize a contact center provider’s software.

 

“Claim” or “Claims” means any pending or threatened claim, cause of action, demand, litigation, action, suit, arbitration, or other Proceeding, or right in action, whether known or unknown, that may be alleged or brought by any Person, Governmental Authority or any administrative, arbitration, or governmental proceeding, investigation or inquiry.

 

“Closing” has the meaning set forth in Section 3.01.

 

“Closing Date” has the meaning set forth in Section 3.01.

 

“Code” means the U.S. Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

 

“Common Stock” means the shares of common stock, $0.0001 par value, of Buyer.

 

“Confidentiality Agreement” means the Confidentiality Agreement, dated as of June 5, 2020, between Buyer and Parent.

 

“Consideration Units” has the meaning set forth in Section 2.06.

 

“Contract” means any contract, agreement, lease, license, commitment, understanding, franchise, warranty, guaranty, mortgage, note, bond or other instrument or consensual obligation that is legally binding, but excluding any Benefit Plan.

 

“Contract Objection” has the meaning set forth in Section 6.11.

 

“Counsel Communications” has the meaning set forth in Section 10.13.

 

“Covered Taxes” has the meaning set forth in Section 6.05(b).

 

“COVID-19 Measures” means any quarantine, “shelter in place,” “stay at home,” workforce reduction, social distancing, shut down, closure, sequester, safety or similar Law, directive, guidelines or recommendations promulgated by any industry group or any Governmental Authority, including the Centers for Disease Control and Prevention and the World Health Organization, in each case, in connection with or in response to COVID-19, including the CARES Act and Families First Act.

 

“CPaaS” (also known as Communications Platform as a Service) means a cloud-based platform that enables developers to add real-time communications features to their own applications without needing to build backend infrastructure and interfaces.

 

“Critical IP License” has the meaning set forth in Section 4.09(j).

 

 

“Current Assets” means, as of any particular time, without duplication, the sum of the amounts outstanding as of such time for each of the current assets included in the line items set forth under the heading “Current Assets” in the Example Net Working Capital Statement for Sellers and their respective Affiliates in respect of the Business, as determined in accordance with GAAP applied consistently with the principles used in the preparation of the Unaudited Financial Statements and the Example Net Working Capital Statement; provided, that Current Assets, as reflected on the Example Net Working Capital Statement, shall not include Tax assets of Sellers in respect of the Business.

 

“Current Liabilities” means, as of any particular time, without duplication, the sum of the amounts outstanding as of such time for each of the current liabilities included in the line items set forth under the heading “Current Liabilities” in the Example Net Working Capital Statement for Sellers and their respective Affiliates in respect of the Business, as determined in accordance with GAAP applied consistently with the principles used in the preparation of the Unaudited Financial Statements and the Example Net Working Capital Statement; provided, that Current Liabilities, as reflected on the Example Net Working Capital Statement, shall not include any accrued but unpaid bonuses under the 2020 Bonus Plan (all of which will be solely addressed through the payments contemplated by Section 6.01(g)) and Tax liabilities of Sellers and their respective Affiliates in respect of the Business.

 

“Cutoff Date” has the meaning set forth in Section 8.01(a).

 

“Debentures” means Buyer’s Series A-1 convertible debentures in substantially the form attached hereto as Exhibit L.

 

“Deductible” has the meaning set forth in Section 8.04(b).

 

“Designated Person” has the meaning set forth in Section 10.13.

 

“Direct Claim” has the meaning set forth in Section 8.05(c).

 

“Disclosure Schedules” means the Seller Disclosure Schedules delivered by Sellers and the Buyer Disclosure Schedules delivered by Buyer, in each case, concurrently with the execution and delivery of the Original Agreement. No exceptions to any representations or warranties disclosed on one Schedule shall constitute an exception to any other representations or warranties made in this Agreement unless the exception is disclosed as provided herein on each such other applicable Schedule or cross-referenced in such other applicable section or unless the applicability of such exception to another Schedule is reasonably apparent on its face.

 

“Domain Names” has the meaning set forth in Section 4.09(c).

 

“Encumbrance” means any security interest, pledge, lien, license, mortgage, charge, covenant not to sue, purchase option, hypothecation, easement, title defect or other encumbrance of any kind, whether voluntary or imposed by applicable Law, and any agreement to give any of the foregoing.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

 

 

“ERISA Affiliate” means, with respect to any Person, any other Person that, together with such first Person, would be treated as a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code.

 

“Estimated Pre-Closing Transferred Employee Bonus Amount” has the meaning set forth in Section 6.01(g).

 

“Example Net Working Capital Statement” means the example statement setting forth the calculation of Net Working Capital as of June 30, 2020 attached as Exhibit A hereto.

 

“Excess Amount” has the meaning set forth in Section 2.07(f)(i).

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

“Excluded Assets” has the meaning set forth in Section 2.03.

 

“Excluded Liabilities” has the meaning set forth in Section 2.05.

 

“Excluded Post-Signing Contract” has the meaning set forth in Section 6.11.

 

“Final NWC Statement” has the meaning set forth in Section 2.07(d).

 

“Final Pre-Closing Transferred Employee Bonus Amount” has the meaning set forth in Section 6.01(g).

 

“Financial Statements” has the meaning set forth in Section 4.04(a).

 

“Fraud” means, as finally determined by an appropriate court of competent jurisdiction, the actual and knowing common law fraud by a Party to this Agreement with respect to the making of a representation or warranty by such Party set forth in this Agreement, with the specific intent to deceive and mislead the other Party, that was material to the claiming Party’s decision to enter into this Agreement and upon which the claiming Party justifiably relied. For the avoidance of doubt, “Fraud” shall only include actual and knowing fraud and shall not include equitable fraud, promissory fraud, unfair dealings fraud or other claims based on constructive knowledge, negligent misrepresentation or similar theories.

 

“GAAP” means generally accepted accounting principles, in effect from time to time applied consistently throughout the periods involved.

 

“Governmental Authority” means any federal, state, provincial, local or foreign government or political subdivision thereof, or any agency or instrumentality of such government or political subdivision, or any self-regulated organization or other non-governmental regulatory authority or quasi-governmental authority (to the extent that the rules, regulations or orders of such organization or authority have the force of Law), or any arbitrator, court or tribunal of competent jurisdiction.

 

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

 

 

“Indebtedness” means, with respect to any Person at any specified time, any of the following Liabilities (whether or not contingent and including, any and all principal, accrued and unpaid interest, prepayment premiums or penalties, related expenses, commitment and other fees, sale or liquidity participation amounts, reimbursements, indemnities and other amounts which would be payable in connection therewith): (a) for borrowed money or in respect of loans or advances (whether or not evidenced by bonds, debentures, notes, or other similar instruments or debt securities); (b) under or in connection with letters of credit or bankers’ acceptances, performance bonds, sureties or similar obligations in each case that have been drawn down, and solely to the extent of such draw; (c) for capitalized leases (as determined in accordance with GAAP) or to pay the deferred and unpaid purchase price of property or equipment; (d) pursuant to securitization or factoring programs or arrangements; (e) net cash payment obligations of such Person under swaps, options, forward sales contracts, derivatives and other hedging contracts, financial instruments or arrangements that may be payable upon termination or expiration thereof; and (f) pursuant to guarantees of any obligation or undertaking of any other Person contemplated by the foregoing clauses (a) through (e) of this definition.

 

“Indemnification Claim” means the amount of any Losses with respect to any Claim for which indemnification is available under this Agreement.

 

“Indemnification Payment Amount” has the meaning set forth in Section 8.10(a).

 

“Indemnified Party” has the meaning set forth in Section 8.04.

 

“Indemnifying Party” has the meaning set forth in Section 8.04.

 

“Intellectual Property” means all of the following, anywhere in the world: Patents, Marks, Trade Secrets, copyrights (including in Software), and all intellectual property rights in confidential information, data, databases, technical drawings and designs, and all other intellectual property rights (whether subject to registration or not) and all registrations and applications therefor and all renewals, extensions, restorations and reversions thereof.

 

“Intellectual Property Licenses” means all licenses, sublicenses and other agreements exclusively related to the Business, by or through which other Persons grant Sellers or Sellers grant any other Persons any exclusive or non-exclusive rights under any Intellectual Property owned or held by the grantor.

 

“Intellectual Property Assignment Agreements” has the meaning set forth in Section 3.02(a)(iv).

 

“Interim Financial Statements” has the meaning set forth in Section 4.04(a).

 

“Interim Statement of Assets and Liabilities” has the meaning set forth in Section 4.04(a).

 

“Interim Statement of Assets and Liabilities Date” has the meaning set forth in Section 4.04(a).

 

“Investor Rights Agreement” has the meaning set forth in Section 3.02(a)(vii).

 

 

“Law” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, other requirement or rule of law of any Governmental Authority.

 

“Leased Real Property” has the meaning set forth in Section 4.08(b).

 

“Leases” has the meaning set forth in Section 4.08(b).

 

“Liabilities” means all liabilities, risks, commitments and obligations of whatever kind and nature, primary or secondary, direct or indirect, asserted or unasserted, absolute or contingent, known or unknown, whether or not accrued.

 

“LIBOR” means the average quoted by the Wall Street Journal on the date the Termination Fee was required to be paid in accordance with Section 9.03 for deposits in U.S. dollars offered in the London interbank market for three months determined at approximately 11:00 a.m. London time; provided that if LIBOR determined as provided above would be less than 0%, then LIBOR shall be deemed to be 0%.

 

“License Agreements” has the meaning set forth in Section 3.02(a)(v).

 

“Losses” means any loss, claim, damage, expense (including reasonable legal fees and expenses or other professional fees and expenses), court cost, amount paid in settlement, other expense associated with enforcing any right hereunder, and expense for investigation and remediation expense; provided, however, that “Loss” shall not include any punitive, indirect, consequential, special, incidental damages or lost or anticipated profits or revenues (except to the extent awarded to a Third Party in a Third Party Claim).

 

“Marks” means trademarks, service marks, trade names, trade dress, business and corporate names, logos, trade styles, brand names, product names, domain names, slogans and any other source identifiers of any kind or nature, including any common law rights therein, and any applications (including intent to use applications), registrations and renewals for any of the foregoing and the goodwill associated with the foregoing.

 

“Material Adverse Effect” means an event, development, circumstance, change or effect that has, individually or in the aggregate, a materially adverse effect on (a) the Transferred Assets, the Purchased Subsidiary, Assumed Liabilities, results of operations or financial condition of the Business, taken as a whole or (b) the ability of Sellers to timely consummate the transactions contemplated by this Agreement; provided, however, that “Material Adverse Effect” shall not include any event, occurrence, fact, condition, or change, directly or indirectly, arising out of or attributable to: (i) any changes, conditions or effects in the United States economies or securities or financial markets in general; (ii) conditions generally affecting the industries in which the Business operates; (iii) national or international political or social conditions, including the engagement by the United States in hostilities or conditions caused by acts of terrorism or war (whether or not declared), or the escalation of any of the foregoing, or any act of God or national or international calamity (including any epidemics, pandemics, COVID-19 and the COVID-19 Measures); (iv) earthquakes, hurricanes, tsunamis, typhoons, lightning, hailstorms, blizzards, tornadoes, droughts, floods, cyclones, mudslides, wildfires, weather conditions and other natural disasters; (v) any change, effect or circumstance resulting from an action required or permitted by this Agreement; (vi) changes in any acceptable accounting standards applicable to the Business interpretations thereof; (vii) any failure, in and of itself, by the Business to meet any internal projections or forecasts, or estimates of revenue or earnings for any period; (viii) changes in Laws or other binding directives issued by any Governmental Authority, or the interpretation or enforcement thereof; or (ix) the negotiation, entry into, announcement, pendency or performance of this Agreement, the taking of any action contemplated or permitted by this Agreement and the Ancillary Agreements contemplated hereby or the taking of any action (or omission to take any action) with Buyer’s consent or at the request of Buyer, or the identity or business plans of Buyer or its Affiliates, including any impact thereof on relationships, contractual or otherwise, with customers, suppliers, distributors, licensors, licensees, joint venture partners or employees; provided, further, that, with respect to clauses (i) through (iv) such event, development, circumstance, change or effect will be taken into account in determining whether a Material Adverse Effect has occurred or is occurring only to the extent it disproportionately adversely affects the Business (taken as a whole) compared to other participants in the industries in which the Business operates.

 

 

“Material Contracts” has the meaning set forth in Section 4.06(a).

 

“Material Customers” has the meaning set forth in Section 4.18(a).

 

“Material Suppliers” has the meaning set forth in Section 4.18(b).

 

“Mexico Subleased Property” means that real property located on the first floor of Building F at Tecnoparque located at Av. Eje 5 Norte No. 990, Colonia Santa Barbara, Azcapotzalco, C.P. 02230, México, Distrito Federal.

 

“Multiemployer Plan” means a multi-employer plan within the meaning of Section 3(37) of ERISA.

 

“Nasdaq” means The Nasdaq Capital Market.

 

“NCP Subscription Agreement” has the meaning set forth in Section 3.02(b)(ix).

 

“Net Working Capital” means an amount equal to Current Assets minus Current Liabilities of Sellers in respect of the Business as of 12:01 a.m. Eastern Time on the Closing Date.

 

“Net Working Capital Adjustment Amount” has the meaning set forth in Section 2.07(f).

 

“Non Assignable Asset” has the meaning set forth in Section 6.12(c).

 

“Non-NA Business Employees” means the UK Business Employees and all Business Employees who work predominantly in Mexico or Israel.

 

“Notice of No Objections” has the meaning set forth in Section 2.07(c)(ii).

 

“Notice of Objections” has the meaning set forth in Section 2.07(c)(i).

 

“NWC Statement” has the meaning set forth in Section 2.07(a).

 

 

“Object Code” means computer programs and/or data which can be interpreted and acted upon by a hardware platform/operating system without the need for any external modification.

 

“Ordinary Course of Business” means, with respect to Sellers, the ordinary course of business of Sellers in respect of the Business consistent with past practice, and with respect to Buyer, the ordinary course of business of Buyer in respect of the respective businesses of Buyer and its Subsidiaries consistent with past practice.

 

“Original Agreement” has the meaning set forth in the recitals.

 

“Original Voting Agreement” has the meaning set forth in the recitals.

 

“Owned Intellectual Property” means all Intellectual Property, including Registered Intellectual Property, that is owned by a Seller and exclusively used in connection with the conduct of the Business as currently conducted.

 

“Parent” has the meaning set forth in the preamble.

 

“Party”/“Parties” have the meanings set forth in the preamble.

 

“Patents” means patents, utility models, design patents and registered designs.

 

“Permits” means permit, license, registration, certificate, approval, franchise, variance and similar authorizations in respect of the Transferred Assets or the Purchased Subsidiary and issued by or obtained from any Governmental Authority.

 

“Permitted Encumbrances” means, as applicable, (a) Encumbrances (i) specifically reflected or specifically reserved against or otherwise disclosed in the Financial Statements, or (ii) incurred in the Ordinary Course of Business since June 30, 2020; (b) liens for Taxes not yet due and payable or being contested in good faith by appropriate procedures; (c) mechanics’, carriers’, workmen’s, repairmen’s or other like Encumbrances arising or incurred in the Ordinary Course of Business; (d) liens arising under original purchase price conditional sales contracts and equipment leases with third parties entered into in the Ordinary Course of Business; (e) Encumbrances which do not, individually or in the aggregate, materially impair the value of the applicable Transferred Assets or the Purchased Subsidiary or the continued use and operation of the applicable Transferred Assets or the Purchased Subsidiary, respectively, to which they relate in the conduct of the applicable Business as presently conducted or as anticipated to be conducted, (f) non-exclusive licenses of Intellectual Property granted to Sellers’ customers or end users in the Ordinary Course of Business, and (g) Encumbrances set forth in Schedule 1.01(b).

 

“Person” means an individual, corporation, partnership, joint venture, limited liability company, Governmental Authority, unincorporated organization, trust, association or other entity.

 

“Personal Information” means any information that identifies or could reasonably be used to identify an individual, browser or device that identifies a specific person and any other personally identifying information that is subject to any applicable Laws.

 

“PIPE Equity Offering” has the meaning set forth in Section 6.15(a).

 

 

“Post Closing Tax Period” means any taxable period (or portion thereof) beginning after the Closing Date.

 

“Post-Signing Contract” has the meaning set forth in Section 4.06(b).

 

“Pre-Closing Tax Period” means any taxable period (or portion thereof) ending on or before the Closing Date.

 

“Pre-Closing Warranty Claims” has the meaning set forth in Section 6.28.

 

“Preferred Stock” means the shares of preferred stock, $0.001 par value, of Buyer.

 

“Prior Counsel” has the meaning set forth in Section 10.13.

 

“Proceeding” means any action, suit, claim, assessment, hearing, proceeding, arbitration, investigation, audit, inquiry, or mediation by or before any Governmental Authority or other Person (other than office actions and similar notices or proceedings in connection with the prosecution of applications for registration or issuance of Intellectual Property).

 

“Proxy Statement” has the meaning set forth in Section 6.22(a).

 

“Purchase Price” has the meaning set forth in Section 2.06.

 

“Purchased Interests” means all of the outstanding membership interests of Kandy Communications LLC.

 

“Purchased Subsidiary” has the meaning set forth in the recitals.

 

“Qualified Benefit Plan” has the meaning set forth in Section 4.14(b).

 

“RCIL” has the meaning set forth in the preamble.

 

“RCOCI” has the meaning set forth in the preamble.

 

“Records” means books of account, ledgers, general, financial and accounting records, files, invoices, customer and supplier lists, other distribution lists, customer billing and credit records, sales and promotional literature, manuals and marketing studies, communications, accounting, sales and business files and records, property records, Tax records, product records, records related to licenses, records, files and documents with regard to the preparation, filing, prosecution, granting, maintenance and defense of Registered Intellectual Property, and other files and records, in each case, whether maintained in electronic or physical form, as applicable.

 

“Registered Intellectual Property” means all registrations and applications for Patents, Marks and copyrights that have been filed with any Governmental Authority anywhere in the world, including the United States Patent and Trademark Office and the United States Copyright Office.

 

“Regulatory Filing” has the meaning set forth in Section 6.12(d).

 

 

“Remaining Business” means all businesses of Sellers, Parent or any of their respective Affiliates other than the Business.

 

“Representative” means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants, representatives and other agents of such Person.

 

“Requisite Buyer Stockholder Approval” means the affirmative vote of a majority of the votes cast by the stockholders present in person or represented by proxy at a meeting of Buyer’s stockholders and entitled to vote thereon in favor of the issuance of shares of Common Stock to Parent upon the conversion of the Debentures issuable to Parent hereunder and the exercise of the Warrants issuable to Parent hereunder, in each case in accordance with the terms thereof, for purposes of satisfying NASDAQ Rule 5635.

 

“Restricted Business” means any business which competes with the Business.

 

“Restricted Period” has the meaning set forth in Section 6.07(a).

 

“Review Period” has the meaning set forth in Section 2.07(b)(i).

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Securities Act” means the Securities Act of 1933, as amended.

 

“Seller” has the meaning set forth in the preamble.

 

“Seller Disclosure Schedules” means the disclosure schedules to the Agreement delivered by Sellers to Buyer.

 

“Sellers’ 401(k) Plan” has the meaning set forth in Section 6.01(h).

 

“Seller Fundamental Representation” means the representations and warranties in Sections 4.01(a) and (b) (Organization and Qualification), 4.01(d) (Capitalization of Purchased Subsidiary), 4.02 (Authority of Sellers), and 4.20 (Brokers).

 

“Sellers’ Knowledge” or any other similar knowledge qualification, means the actual knowledge, after due inquiry, of those persons listed on Schedule 1.01(c).

 

“Seller Marks” means all Marks, including those that incorporate the terms “Ribbon,” “Ribbon Communications,” “GENBAND” or “Sonus”, or associated logos, either alone or in combination with other words and all marks, trade dress, logos, domain names and other source identifiers confusingly similar to or embodying any of the foregoing, either alone or in combination with other words, together with all translations, localizations, adaptations, derivations and combinations thereof, in each case, that are not included in the Transferred Assets.

 

“Seller Surviving Representations” has the meaning set forth in Section 8.01(a).

 

 

“Senior Secured Credit Agreement” means that certain Credit Agreement, dated as of March 3, 2020, by and among Parent (as guarantor), RCOCI (as borrower), the financial institutions from time to time party thereto, and Citizens Bank, N.A. (as administrative agent).

 

“Shared Contract” means (a) the Contracts set forth on Schedule 1.01(d), (b) any Contract mutually agreed to by the Parties to be a Shared Contract pursuant to Section 6.13(a) and (c) any Contract identified by Buyer and Sellers pursuant to Section 6.13(a) that is entered into by a Seller with a Third Party to obtain goods or services that relates both to the Business (or the Transferred Assets) and the other business of Sellers or its Affiliates (or to the Excluded Assets).

 

“Shortfall Amount” has the meaning set forth in Section 2.07(f)(ii).

 

“Significant Investors” has the meaning set forth in the recitals.

 

“Software” means software, whether in Object Code or Source Code format.

 

“Software Reseller Agreement” has the meaning set forth in Section 6.30.

 

“Source Code” means computer programs and/or data in human-readable form from which the Object Code of the Software was created, on suitable media in such form that it can be translated or interpreted into that Object Code together with all technical information and documentation necessary for the use, reproduction, modification, maintenance and enhancement of those programs and data.

 

“Straddle Period” has the meaning set forth in Section 6.05(b).

 

“Subleased Property” means that real property located at 500 Paladium Drive, Suite 2100, Ottawa, Ontario, K2V 1C2, Canada.

 

“Subsidiary” of any Person, means any corporation, partnership, joint venture or other legal entity of which such Person (either above or through or together with any other Subsidiary), owns, directly or indirectly, more than fifty percent (50%) of the stock or other equity interests, the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity.

 

“Survival Period” has the meaning set forth in Section 8.01(c).

 

“Tangible Personal Property” has the meaning set forth in Section 2.02(d).

 

“Taxes” means all federal, state, provincial, local, foreign and other income, gross receipts, sales, goods and services tax, harmonized sales tax, value added tax, land transfer, use, production, ad valorem, transfer, franchise, registration, profits, license, lease, service, service use, withholding, payroll, employment, unemployment, estimated, excise, severance, environmental, stamp, occupation, premium, social security, property (real or personal), real property gains, windfall profits, customs, duties or other taxes, fees, assessments or charges in each case in the nature of a tax imposed by a Governmental Authority, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties.

 

 

“Tax Matter” has the meaning set forth in Section 6.05(f).

 

“Tax Return” means any return, declaration, report, claim for refund, information return or statement or other document filed with a Governmental Authority with respect to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

 

“Technology” means all tangible items constituting, disclosing or embodying any Intellectual Property, including Software and all versions thereof and all other technology from which such items were or are derived, including (i) works of authorship (including Software, firmware and middleware in Source Code and Object Code form, architecture, databases, plugins, libraries, APIs, interfaces, algorithms and documentation); (ii) inventions and designs; (iii) databases, data compilations and collections, and customer and technical data, (iv) methods and processes; and (v) devices, prototypes, specifications and schematics.

 

“Termination Date” has the meaning set forth in Section 9.01(a).

 

“Termination Fee” has the meaning set forth in Section 9.03.

 

“Territory” means worldwide.

 

“Third Party” means, with respect to any specified Person, any other Person who is not an Affiliate of such specified Person (other than any Governmental Authority).

 

“Third Party Claim” has the meaning set forth in Section 8.05(a).

 

“Trade Secrets” means confidential or proprietary trade secrets meeting the definition of a trade secret under the Uniform Trade Secrets Act or other similar legislation or common laws governing protection of trade secrets or confidential information anywhere in the world, including information, know-how, data and databases.

 

“Transfer Taxes” means all transfer, documentary, sales, use, real property transfer, stamp, registration and other such Taxes and all conveyance fees, recording charges and other fees and charges (including, as to any such Taxes, fees, or charges, any penalties and interest) incurred in connection with the consummation of the transactions contemplated by this Agreement.

 

“Transferred Assets” has the meaning set forth in Section 2.02.

 

“Transferred Contract” means (i) any Contract that relates exclusively to the Business, (ii) any Contract set forth on Schedule 1.01(e), and (iii) that portion of any Shared Contracts that is identified by Buyer and Sellers as reasonably necessary for Buyer to continue operation of the Business upon termination of any service provided under the Transition Services Agreement.

 

“Transferred Employee” means any Business Employee who accepts Buyer’s offer of employment or UK Business Employee who transfers to Buyer or an Affiliate of Buyer pursuant to TUPE.

 

“Transferred Employee Bonus Amount” has the meaning set forth in Section 6.01(g).

 

 

“Transferred Intellectual Property” means (a) all Owned Intellectual Property, (b) all Intellectual Property Licenses, and (c) all Technology owned by or licensed to Sellers that is exclusively used in connection with the conduct of the Business as currently conducted (the foregoing constituting the “Transferred Technology”).

 

“Transferred Patents” has the meaning set forth in Section 2.02(c).

 

“Transferred Records” means all Records in the possession and control of Sellers, to the extent a transfer is permitted by Law, to the extent (and solely to the extent) that they relate exclusively to (i) the Transferred Assets, (ii) the Purchased Subsidiary, (iii) the Assumed Liabilities or (iv) the Business (but excluding Records not reasonably separable from documents or reports that do not relate to the Business); provided, however, that if any Records contain any information of Sellers or any of their respective Affiliates not related to the Business or not related to the employment of the Transferred Employees, Sellers may elect to redact those portions of such Records to the extent pertaining to such other information or, in Sellers’ sole discretion, Sellers may deliver unredacted copies of such Records containing information not related to the Business or not related to the employment of the Transferred Employees but such information shall be subject to the confidentiality provisions of this Agreement, shall remain the property of Sellers, and Buyer shall have no rights with respect to such information; provided, further, that Transferred Records shall not include any Tax Return or other Tax records, other than those (or portions thereof) Tax Returns that do not relate to income Taxes and that relate exclusively to the Business, the Transferred Assets, the Purchased Subsidiary or the Assumed Liabilities.

 

“Transition Services Agreement” has the meaning set forth in Section 3.02(a)(vi).

 

“TUPE” means the Transfer of Undertakings (Protection of Employment) Regulations 2006 of the United Kingdom.

 

“UCaaS” (also known as Unified communications as a Service) means a cloud delivery model that offers a variety of communication and collaboration applications and services.

 

“Units” means units of Buyer’s securities, each Unit consisting of (i) $1,000 in principal amount of Debentures and (ii) one Warrant.

 

“UK Business Employee” means a Business Employee who works predominantly in the United Kingdom.

 

“Unaudited Financial Statements” has the meaning set forth in Section 4.04(a).

 

“Voting Agreement” has the meaning set forth in the recitals.

 

“VWAP of Buyer Common Stock” means the volume weighted average price of Common Stock for the ten (10) trading days immediately prior to a date of determination, starting with the opening of trading on the first trading day to the closing of the second to last trading day prior to such date of determination, as reported by Bloomberg.

 

“VWAP of Buyer Closing Common Stock” means the volume weighted average price of Common Stock for the ten (10) trading days immediately prior to the Closing Date, starting with the opening of trading on the first trading day to the closing of the second to last trading day prior to the Closing Date, as reported by Bloomberg.

 

 

“WARN Act” means the Worker Adjustment and Retraining Notification Act of 1988 or similar state or local Law.

 

“Warrant” means a warrant to purchase 100 shares of Common Stock, in substantially the form of Exhibit M attached hereto.

 

ARTICLE II

PURCHASE AND SALE

 

Section 2.01. Purchase and Sale of the Purchased Interests. Subject to the terms and conditions set forth herein, at the Closing, RCOCI shall sell to Buyer and Buyer shall purchase from RCOCI, all of the Purchased Interests, free and clear of all Encumbrances other than restrictions on transfer arising under applicable securities Laws.

 

Section 2.02. Purchase and Sale of Assets. Subject to the terms and conditions set forth herein, at the Closing, Sellers shall, or shall cause their respective Subsidiaries to, sell, assign, transfer, convey and deliver to Buyer, and Buyer shall purchase from Sellers or their respective Subsidiaries, free and clear of all Encumbrances other than Permitted Encumbrances, all of Sellers’ or their respective Subsidiaries, as applicable, right, title and interest in, to and under the following assets, properties and rights of Sellers or the respective Subsidiaries (provided, that any Transferred Assets that are owned by the Purchased Subsidiary shall not be separately sold, but rather shall transfer to Buyer indirectly via the sale of the Purchased Interests), as applicable, to the extent that such assets, properties and rights exist as of the Closing Date (collectively, the “Transferred Assets”):

 

(a) the Current Assets as of 12:01 a.m. Eastern Time on the Closing Date;

 

(b) all Transferred Contracts;

 

(c) all Transferred Intellectual Property, including the patents set forth on Schedule 2.02(c)(i) (the “Transferred Patents”) and the proprietary Software set forth on Schedule 2.02(c)(ii);

 

(d) all furniture, fixtures, equipment and supplies either located at the Subleased Property or offsite for purposes of remote working practices by the Business Employees and in each case primarily related to the Business and owned by Sellers, including, such furniture, fixtures, equipment, supplies and other tangible personal property listed on Schedule 2.02(d) (collectively, the “Tangible Personal Property”);

 

(e) all purchase orders or other commitments exclusively related to the Business that remain unfulfilled as of the Closing, other than as expressly included in the Excluded Assets;

 

(f) to the extent transferable under applicable Law, all Permits (and all applications therefor) used exclusively in, or obtained exclusively for, the operation of the Business;

 

 

(g) to the extent transferrable under applicable Law, in whole or in part, all rights to all causes of action, Proceedings, judgments or defenses against third parties and demands of any nature arising on or after the Closing Date, whether arising by way of counterclaim or otherwise, in each case to the extent (and only to the extent) exclusively related to the Business, any Transferred Asset or Assumed Liability, except for claims or refunds for any Taxes that constitute Assumed Liabilities;

 

(h) all rights, claims and credits (including all guaranties, warranties, indemnities and similar rights) of Sellers or any of their respective controlled Affiliates to the extent (and only to the extent) related exclusively to the Business, any Transferred Asset or Assumed Liability;

 

(i) the Transferred Records;

 

(j) all personnel Records to the extent (and only to the extent) pertaining exclusively to the Transferred Employees, to the extent permitted by applicable Law (provided that Sellers shall be permitted to keep a copy of all such personnel Records); and

 

(k) all goodwill of Sellers associated with, or attributable to, the Business, and the going concern value of the Business.

 

Section 2.03. Excluded Assets. Other than the Transferred Assets subject to Section 2.02, Buyer expressly understands and agrees that it is not purchasing or acquiring, and Sellers and/or their respective Subsidiaries are not selling or assigning, any other assets or properties of Sellers or their respective Subsidiaries, and all such other assets and properties shall be excluded from the Transferred Assets (the “Excluded Assets”). For the avoidance of doubt, notwithstanding anything in Section 2.02, Excluded Assets shall include (and the Transferred Assets shall exclude) the following assets and properties of Sellers and their respective Subsidiaries:

 

(a) all cash and cash equivalents (including other investment assets), bank accounts and securities of Sellers or their respective Affiliates;

 

(b) other than the Transferred Contracts, all Contracts to which any Seller or its Affiliates is a party, including all employment agreements of Business Employees;

 

(c) other than the Transferred Intellectual Property, all other Intellectual Property owned or held for use by any Seller or its Affiliates and its and their Third Party licensors;

 

(d) the corporate seals, organizational documents, minute books, stock books, Tax Returns, books of account or other records having to do with the corporate organization of Sellers or their Affiliates (other than the Purchased Subsidiary), all employee-related or employee benefit-related files or records, other than personnel files of Transferred Employees (to the extent the transfer thereof is permitted by applicable Law), and any other books and records which a Seller is prohibited from disclosing or transferring to Buyer under applicable Law and is required by applicable Law to retain;

 

(e) all insurance policies and insurance contracts insuring the Business or the Transferred Assets that are arranged or maintained by Sellers or any of their respective Affiliates, including any prepaid insurance premiums or insurance recoveries thereunder and the right to assert claims with respect to any such insurance recoveries, whether arising before or after Closing;

 

 

(f) all rights, claims and credits (including all guarantees, warranties, indemnities and similar rights) of Sellers or any of their respective Affiliates to the extent relating to any Excluded Asset or any Excluded Liability, including any and all such rights, claims and credits arising under insurance policies in favor of Sellers and their respective Affiliates relating to any Excluded Asset or any Excluded Liability;

 

(g) all claims of any Seller or any of its Affiliates under any Contract in respect of breaches by any party to such Contract (other than such Seller and its Affiliates) to the extent such breaches occurred prior to the Closing;

 

(h) any Counsel Communications;

 

(i) all Benefit Plans and trusts or other assets attributable thereto;

 

(j) all Tax assets (including duty and Tax refunds, Tax prepayments, Tax books and records and Tax Returns) of a Seller or any of its Affiliates (including for this purpose any refunds of Taxes for which any Seller or any of its Affiliates is responsible under the terms of this Agreement);

 

(k) all rights of Sellers and their respective Affiliates under this Agreement and the other agreements and instruments executed and delivered in connection with this Agreement (including the Ancillary Agreements);

 

(l) the assets, properties and rights specifically set forth on Schedule 2.03(l); and

 

(m) all Leases except as set forth in the Sublease Agreement.

 

Section 2.04. Assumed Liabilities. Subject to the terms and conditions set forth herein, Buyer shall assume and agree to pay, perform and discharge when due any and all Liabilities of each Seller or its Subsidiaries arising out of or relating to the Business or the Transferred Assets, other than the Excluded Liabilities (collectively, the “Assumed Liabilities”) (provided that Assumed Liabilities of the Purchased Subsidiary shall not be separately assumed by Buyer, but rather shall be transferred to Buyer indirectly via the purchase of the Purchased Interests), including, the following:

 

(a) Liabilities arising out of or relating to the ownership, operation or use of the Transferred Assets or the operation or conduct of the Business from and after the Closing Date solely (i) to the extent such Liabilities actually arise out of or relate to the ownership, operation or use of the Transferred Assets or the conduct of the Business on or after the Closing Date or (ii) to the extent such Liabilities are within the scope of any representation or warranty set forth in Article IV (whether or not indemnification with respect to such Liabilities would be unavailable as a result of any limitations on indemnification set forth in Article VIII);

 

(b) all Current Liabilities as of 12:01 a.m. Eastern Time on the Closing Date;

 

 

(c) all Liabilities required to be performed on or after the Closing arising under the Transferred Contracts, Permits, approval or authorization constituting part of the Transferred Assets, including any and all of Buyer’s portion of the Shared Contracts;

 

(d) all Liabilities to the extent relating to Taxes attributable to or imposed on the Business or the Transferred Assets for any period (or portion thereof) beginning after the Closing Date (determined, if applicable, in accordance with Section 6.05), and all Transfer Taxes for which Buyer is responsible pursuant to Section 6.05;

 

(e) all Liabilities relating to employment of, or employee benefits, compensation or other arrangements with respect to, any Transferred Employee (or any dependent or beneficiary of any Transferred Employee) arising on or after the Closing and all Liabilities expressly assumed by Buyer pursuant to Section 6.01;

 

(f) the Liabilities arising under Pre-Closing Warranty Claims except to the extent set forth in Section 6.28;

 

(g) without limiting any obligations under the Transition Services Agreement, all Liabilities (including the costs and expenses of coverage and administration, benefit claims and Proceedings and Taxes) arising out of, related to or in connection with, (i) the eligibility or participation of Business Employees (or any dependent or beneficiary thereof) in, or compensation or benefits provided to any Business Employee (or any dependent or beneficiary thereof) under, any Benefit Plan following the Closing, and (ii) any change to the terms and conditions of the UK Business Employees following the Closing; and

 

(h) all Liabilities in respect of any Claim arising in, or relating to, the ownership, operation or conduct of the Business on or after the Closing.

 

Section 2.05. Excluded Liabilities. Buyer shall not assume and shall not be responsible to pay, perform or discharge any of the following Liabilities of Sellers or their respective Affiliates (each, an “Excluded Liability”, and collectively, the “Excluded Liabilities”):

 

(a) except for the Current Liabilities and the Assumed Liabilities, any Liabilities arising out of or relating to any Seller’s ownership or operation of the Business, the Transferred Assets or the Purchased Subsidiary prior to the Closing Date solely to the extent such Liabilities are not within the scope of any representation or warranty set forth in Article IV (whether or not indemnification with respect to such Liabilities would be available as a result of any limitations on indemnification set forth in Article VIII);

 

(b) any Liabilities to the extent relating to or arising out of the Excluded Assets;

 

(c) all Indebtedness (other than Indebtedness to the extent included in the calculation of Net Working Capital set forth in the Final NWC Statement);

 

(d) all Taxes of Sellers and their respective Affiliates that are attributable to taxable periods (or portions thereof) ending on or prior to the Closing Date (determined, as applicable, in accordance with Section 6.05), any income Taxes of Sellers and their respective Affiliates triggered on the sale of the Transferred Assets or the Transferred Interests, and any Transfer Taxes for which Sellers are liable pursuant to Section 6.05 (but excluding, in each case, those Taxes for which Buyer is responsible pursuant to Section 6.05);

 

 

(e) all Liabilities arising out of or relating to the employment of any Business Employee (or any dependent or beneficiary of any Business Employee) by Sellers and/or their Affiliates, to the extent arising out of events occurring solely prior to the Closing Date, including any failure by Sellers or their Affiliates to comply with its obligations under Regulation 13 of TUPE, except to the extent that any such Liabilities are expressly assumed by Buyer under Section 6.01;

 

(f) except for the Assumed Liabilities and any Liabilities set forth in the Transition Services Agreement, any Liabilities of Sellers arising under or in connection with any Benefit Plan providing benefits to any Business Employee prior to the Closing Date;

 

(g) the Liabilities arising under Pre-Closing Warranty Claims solely to the extent set forth in Section 6.28;

 

(h) any Liabilities of the Business relating to or arising from unfulfilled commitments, quotations, purchase orders, customer orders or work orders issued by the Business’ customers to Sellers or their respective Affiliates on or before the Closing that do not constitute part of the Transferred Assets; and

 

(i) any Liabilities of Sellers arising or incurred in connection with the negotiation, preparation, investigation and performance of this Agreement, the Ancillary Agreements and the transactions contemplated hereby and thereby, including fees and expenses of counsel, accountants, consultants, advisers and others (but excluding those Taxes or the costs and expenses for which Buyer is responsible pursuant to Section 6.05, Section 6.15 and Section 6.16).

 

Section 2.06. Purchase Price. The purchase price to be paid by Buyer to Parent in consideration for all of Sellers’ and/or their Subsidiaries’ right, title and interest in, to and under the Transferred Assets and the Purchased Interests (the “Purchase Price”) shall be $45,000,000, less (i) the Estimated Transferred Employee Bonus Amount, plus (ii) the Net Working Capital Adjustment Amount, if any, as of 12:01 a.m. Eastern Time on the Closing Date (as determined by Section 2.07 below, which may be a negative number). The Purchase Price shall be payable in the form of Units, with the number of Units to be issued to Buyer calculated as the Purchase Price divided by $1,000.00, with any fractional number of Units to be rounded up or down, as applicable, to the nearest whole number (the “Consideration Units”).

 

Section 2.07. Purchase Price Adjustment.

 

(a) Post-Closing Adjustment. Sellers shall deliver to Buyer no later than sixty (60) days after the Closing Date a closing statement (the “NWC Statement”) signed by an appropriate officer of Parent setting forth Sellers’ good faith calculation of the amount of Net Working Capital as of 12:01 a.m. Eastern Time on the Closing Date, which shall take into account, and set forth as separate line items, all provisions establishing the basis for such calculation of the Net Working Capital, in each case together with supporting documentation used by Sellers in calculating such amounts. The NWC Statement (including the calculations therein) shall be prepared in accordance with GAAP applied consistently with the principles used in the preparation of the Unaudited Financial Statements and the Example Net Working Capital Statement; provided, that Net Working Capital shall also be calculated in accordance with the definition of that term herein (and any other defined terms incorporated therein).

 

 

(b) Reasonable Access. From and after the Closing, Sellers shall, and shall cause their Affiliates to, on reasonable prior notice to Sellers and subject to the execution of customary work paper access letters if requested by accountants of Sellers, (i) provide Buyer and its Representatives with reasonable access during normal business hours to the Records and work papers of the Business used in the preparation of the NWC Statement and (ii) cooperate with and assist Buyer and its Representatives in connection with the review of such materials, including by making available their employees, accountants and other personnel to the extent reasonably requested, in each case, solely in connection with Buyer’s review of the NWC Statement; provided, such access may be limited to the extent Sellers reasonably determine, in light of COVID-19 or COVID-19 Measures, that such access would jeopardize the health and safety of any of their respective employees or other Representatives.

 

(c) Notice of Objection.

 

(i) If Buyer has any objections to the NWC Statement, it shall deliver to Sellers a written statement (a “Notice of Objection”) setting forth in reasonable detail the particulars of such disagreement (including the specific items in the NWC Statement that are in dispute and the nature and amount of any disagreement so identified) and indicating any adjustments to the NWC Statement not later than forty-five (45) days after Buyer’s receipt of the NWC Statement (such forty-five (45)-day period, the “Review Period”). If Buyer fails to deliver a Notice of Objection within the Review Period, the NWC Statement and the amount set forth therein shall be deemed to have been accepted by Buyer and shall be deemed final and binding upon all of the Parties. If Buyer delivers a Notice of Objection to Sellers within the Review Period, Sellers and Buyer shall work in good faith to resolve Buyer’s objections within the thirty (30)-day period following the delivery of the Notice of Objection.

 

(ii) If Buyer has no objections to the NWC Statement, Buyer may deliver to Sellers a written statement stating that it has no objections to the NWC Statement during the Review Period (such notice, a “Notice of No Objections”). In the case that Buyer delivers a Notice of No Objection, there shall be no Review Period and the NWC Statement delivered by Sellers shall be deemed the Final NWC Statement and shall be deemed final and binding upon all of the Parties.

 

(d) Resolution of Dispute. In the event that Sellers and Buyer are unable to resolve in writing any of Buyer’s objections in the Notice of Objection within the thirty (30)-day period (or such longer period as may be agreed by Buyer and Sellers) following the delivery of a Notice of Objection, the resolution of all unresolved items (“Disputed Items”) shall be submitted to KPMG LLP (or such other independent accounting firm of recognized national standing in the United States as may be mutually selected by Buyer and Sellers that is not otherwise engaged by the Parties or their Affiliates) (such accounting firm, the “Accounting Firm”) to resolve any remaining disagreements. Buyer and Sellers shall promptly (but in any event within ten (10) Business Days) following the formal engagement of the Accounting Firm, provide the Accounting Firm (copying the other upon submission) with a written presentation setting forth their respective calculations of and assertions regarding the Disputed Items and shall allow the Accounting Firm to conduct an independent analysis and audit of the Disputed Items using GAAP and the Example Net Working Capital Statement and taking into account the definition of that term herein (and any other defined terms incorporated therein), and based solely on the documentation submitted by, and the presentations made by, each of the Parties. The Accounting Firm shall be instructed to render its written determination with respect to such Disputed Items as soon as reasonably practicable (which the Parties agree shall not be later than thirty (30) days following the formal engagement of the Accounting Firm), and shall be within the range of dispute between Buyer and Sellers. The Parties agree that the purpose of the adjustment contemplated by this Section 2.07 is to measure the amount of Net Working Capital as of 12:01 a.m. Eastern Time on the Closing Date using GAAP applied consistently with the principles used in the preparation of the Unaudited Financial Statements and the Example Net Working Capital Statement and taking into account the definition of that term herein (and any other defined terms incorporated therein). The determination of the Accounting Firm, acting as an expert and not an arbitrator, with respect to any such disagreements shall be binding and final for purposes of this Agreement. The term “Final NWC Statement” as used in this Agreement shall mean the NWC Statement that is deemed final in accordance with Section 2.07(c) or the NWC Statement resulting from the determinations made by the Accounting Firm in accordance with this Section 2.07(d), as applicable.

 

 

(e) Accounting Firm Fees. The Accounting Firm shall allocate its costs and expenses between Buyer and Sellers based on the percentage of the aggregate contested amount submitted to the Accounting Firm that is ultimately awarded to Buyer, on the one hand, or Sellers, on the other hand, such that Buyer bears a percentage of such costs and expenses equal to the percentage of the contested amount awarded to Sellers and Sellers bear a percentage of such costs and expenses equal to the percentage of the contested amount awarded to Buyer.

 

(f) Adjustment Payments. Within three (3) Business Days following the determination of the Final NWC Statement, Buyer or Sellers (or their respective Affiliates) shall make an additional payment in respect of the Purchase Price (if applicable) as follows (the “Net Working Capital Adjustment Amount”):

 

(i) if the Net Working Capital (reflected on the Final NWC Statement) is greater than zero (the absolute value of such excess amount, the “Excess Amount”), Buyer shall pay to Sellers an amount equal to the Excess Amount by delivering to Seller that number of Units calculated as the Excess Amount divided by $1,000.00.

 

(ii) if the Net Working Capital (reflected on the Final NWC Statement) is less than negative $3,000,000 (the absolute value of such shortfall amount, the “Shortfall Amount”), Sellers shall either, in its sole discretion, (A) pay to Buyer an amount equal to the Shortfall Amount by wire transfer of immediately available funds to an account designated by Buyer in writing, (B) surrender a number of Consideration Units to Buyer equal to the quotient of (1) the Shortfall Amount, divided by (2) $1,000.00, with any fractional number of Consideration Units to be rounded down to the nearest whole number, or (C) surrender a number of shares of Common Stock to Buyer equal to the quotient of (1) the Shortfall Amount, divided by (2) the Buyer Stock Price (rounded down to the nearest whole number).

 

For the avoidance of doubt, if the Net Working Capital is greater than negative $3,000,000 but less than zero, then no Net Working Capital Adjustment Amount shall be payable. Any payment pursuant to this Section 2.07(f) shall be treated as an adjustment to the Purchase Price for all tax purposes. No Losses may be claimed under Article VIII or otherwise by any Indemnified Party to the extent such Liabilities are reflected in the Net Working Capital set forth in the Final NWC Statement pursuant to this Section 2.07.

 

 

Section 2.08. Allocation of Purchase Price.

 

(a) In no event later than the later of (i) ninety (90) days after the Closing Date or (ii) forty-five (45) days after the final determination of the adjustment payment contemplated by Section 2.07(f), Sellers will provide Buyer with a statement (or statements) (the “Allocation Schedule”) with Sellers’ proposed allocation of the Purchase Price (plus any other amounts, including Assumed Liabilities, to the extent properly taken into account as consideration for applicable Tax purposes) among the Transferred Assets and the assets of the Purchased Subsidiary and, if applicable, the Ancillary Agreements and any other rights transferred hereunder or thereunder in accordance with Section 1060 of the Code (and any other applicable state, local or non-U.S. Law). Buyer may, within thirty (30) days after receiving such Allocation Schedule, propose to Sellers in writing any changes to such Allocation Schedule that are consistent with applicable Law (the “Allocation Notice of Objection”), and if Buyer does not deliver such a Notice of Objection within such period, Buyer shall be deemed to have accepted such proposed Allocation Schedule and it shall become final and binding on the Parties. If Buyer delivers an Allocation Notice of Objection, then Buyer and Sellers will endeavor in good faith to resolve any differences with respect to the Allocation Schedule within thirty (30) days after Sellers’ receipt of the Allocation Notice of Objection. If Buyer and Sellers are unable to resolve such differences, each of Buyer and Sellers shall be entitled to utilize an allocation of the Purchase Price (and any other applicable amounts) that it believes appropriate.

 

(b) Except as otherwise required by Law, Buyer and Sellers agree that if (and only if) they reach agreement on an allocation as contemplated by Section 2.08(a), they shall each (and shall cause their respective Affiliates to) file all income Tax Returns (including amended returns and claims for refunds) and information reports in a manner consistent with the agreed allocation; provided that nothing contained in this Section 2.08(b) shall prevent any Party (or their Affiliates) from settling, or require any of them to litigate any challenge, proposed deficiency, adjustment or other similar proceeding by any Governmental Authority with respect to the agreed allocation.

 

(c) The provisions of this Section 2.08 will survive the Closing indefinitely.

 

ARTICLE III

CLOSING

 

Section 3.01. Closing. Subject to the terms and conditions of this Agreement, the consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place remotely by the exchange of signed documents by PDF or other electronic means following satisfaction or waiver of all of the conditions to the Closing set forth in Article VII (other than those to be satisfied at the Closing), or on such other date as is mutually agreeable to Buyer and Sellers. The day of Closing shall be referred to as the “Closing Date”. Except as otherwise provided herein, at the Closing, all transactions contemplated by this Agreement shall take place contemporaneously and no such transaction shall be deemed completed or consummated until all such transactions are completed or consummated. Unless the Parties otherwise agree in writing, the Closing shall be deemed effective as of 12:01 a.m. Eastern Time on the Closing Date.

 

 

Section 3.02. Closing Deliverables.

 

(a) At the Closing, Sellers, as applicable, shall deliver (or cause to be delivered) to Buyer the following:

 

(i) a bill of sale substantially in the form of Exhibit B hereto (the “Bill of Sale”) and duly executed by Sellers;

 

(ii) an assignment and assumption agreement substantially in the form of Exhibit C hereto (the “Assignment and Assumption Agreement”) and duly executed by Sellers;

 

(iii) a sublease agreement with respect to the Subleased Property on the terms set forth in Exhibit D hereto (the “Sublease Agreement”) and duly executed by the applicable Seller;

 

(iv) assignments of all Registered Intellectual Property included in the Owned Intellectual Property in substantially in the form of Exhibit E hereto (the “Intellectual Property Assignment Agreements”) and duly executed by Sellers;

 

(v) a patent license agreement from Sellers to Buyer substantially in the form of Exhibit F-1 hereto (the “Seller Patent License Agreement”), a patent license agreement from Buyer to Sellers substantially in the form of Exhibit F-2 hereto (the “Buyer Patent License Agreement”), a proprietary software license agreement from Sellers to Buyer substantially in the form of Exhibit G hereto (the “Seller Software License Agreement”) and a proprietary software license agreement from Buyer to Sellers substantially in the form of Exhibit H hereto (the “Buyer Software License Agreement”) (each a “License Agreement” and, collectively, the “License Agreements”) and duly executed by Sellers;

 

(vi) a transition services agreement substantially in the form of Exhibit I hereto (the “Transition Services Agreement”) and duly executed by Sellers;

 

(vii) an investor rights agreement substantially in the form of Exhibit J hereto (the “Investor Rights Agreement”) and duly executed by Parent;

 

(viii) instruments of transfer representing the Purchased Interests either duly endorsed for transfer in favor of Buyer or accompanied by a membership interest power duly executed by RCOCI;

 

(ix) a certificate, dated the Closing Date and signed by a duly authorized officer of each Seller, that each of the conditions set forth in Section 7.02(a) and Section 7.02(b) have been satisfied;

 

 

(x) a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of each Seller certifying (A) that attached thereto are true and complete copies of all resolutions adopted by the board of directors of Parent authorizing the execution, delivery and performance of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby, and (B) the names and signatures of the officers of such Seller authorized to sign this Agreement, the Ancillary Agreements and the other documents to be delivered hereunder and thereunder; and

 

(xi) an IRS Form W-9 from each Seller that is a United States person (as defined in Section 7701 of the Code).

 

(b) At the Closing, Buyer shall deliver to Sellers, as applicable, the following:

 

(i) that number of Purchased Units calculated as the quotient of (A) $45,000,000 less the Estimated Transferred Employee Bonus Amount divided by (B) $1,000.00, with any fractional number of Units rounded up or down, as applicable, to the nearest whole number;

 

(ii) the Bill of Sale duly executed by Buyer;

 

(iii) the Assignment and Assumption Agreement duly executed by Buyer;

 

(iv) the Sublease Agreement duly executed by Buyer;

 

(v) the Intellectual Property Assignment Agreements duly executed by Buyer;

 

(vi) the License Agreements duly executed by Buyer;

 

(vii) the Transition Services Agreement duly executed by Buyer;

 

(viii) the Investor Rights Agreement duly executed by Buyer;

 

(ix) evidence that the Initial Closing, as defined in that certain subscription agreement dated as of December 1, 2020 to which Buyer and SPAC Opportunity Partners Investment Sub LLC are parties (the “NCP Subscription Agreement”), shall have occurred (or shall occur simultaneously with the Closing);

 

(x) a certificate, dated the Closing Date and signed by a duly authorized officer of Buyer, that each of the conditions set forth in Section 7.03(a), Section 7.03(b) and Section 7.03(d) have been satisfied;

 

(xi) a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying (A) that attached thereto are true and complete copies of all resolutions adopted by the board of directors of Buyer authorizing the execution, delivery and performance of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated hereby and thereby, and (B) the names and signatures of the officers of Buyer authorized to sign this Agreement, the Ancillary Agreements and the other documents to be delivered hereunder and thereunder; and

 

 

(xii) such other documents or instruments as Sellers reasonably request and are reasonably necessary to consummate the transactions contemplated by this Agreement.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLERS

 

Except as set forth in the Seller Disclosure Schedules, Sellers represent and warrant to Buyer as of the date of the Original Agreement (provided that references to “this Agreement” shall be deemed to reference the Original Agreement) and as of the Closing Date as follows:

 

Section 4.01. Organization and Qualification; Purchased Subsidiary.

 

(a) Each Seller and Parent are duly organized and validly existing under the laws of the jurisdiction of its organization, as applicable. Each Seller or the applicable Affiliate of such Seller and Parent have all requisite corporate power and authority to own, lease, operate or use, as the case may be, the Transferred Assets.

 

(b) The Purchased Subsidiary is duly organized and validly existing under the laws of the jurisdiction of its organization. The Purchased Subsidiary has all requisite limited liability company power and authority to own, lease, operate or use, as the case may be, its assets and properties.

 

(c) Each Seller or any applicable Affiliate of such Seller which has title to any asset that constitutes a Transferred Asset is duly qualified and in good standing in each jurisdiction in which Transferred Assets held by it are currently used by such Seller or such Affiliate and where the ownership, leasing, operation or use of its assets requires such qualification, except where the failure to have such qualification would not be material to the Business. The jurisdictions in which each Seller, with regard to the Business, is qualified or registered to do business as a foreign corporation are set forth on Schedule 4.01(c).

 

(d) All of the Purchased Interests are validly issued and fully paid. RCOCI owns of record and beneficially all of the Purchased Interests, free and clear of all Encumbrances except for Encumbrances arising under securities Laws. The Purchased Interests constitute all of the issued and outstanding equity securities of the Purchased Subsidiary, and the Purchased Subsidiary does not have any other equity securities, or any securities convertible into or exchangeable for equity securities, and there are no Contracts, arrangements or commitments of any kind for or relating to the sale, transfer, issuance or voting of any of the foregoing by RCOCI or the Purchased Subsidiary, and there are no equity or equity-based awards in respect of the Purchased Interests. The Purchased Interests are not subject to, nor were they issued in violation of, any purchase option, call option, right of first refusal or offer, co-sale or participation right, preemptive right, subscription right or similar right. The limited liability company powers, endorsements, assignments and other instruments to be executed and delivered by RCOCI to Buyer at the Closing will be valid and binding obligations of RCOCI, enforceable in accordance with their respective terms, and will vest in Buyer good, valid and marketable title to the Purchased Interests free and clear of all Encumbrances, except for Encumbrances arising under securities Laws.

 

 

Section 4.02. Authority of Sellers. Each Seller and Parent have all necessary corporate power and authority to enter into this Agreement and the Ancillary Agreements to which such Seller or Parent, as applicable, is a party, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by such Seller and Parent of this Agreement and any Ancillary Agreement to which such Seller or Parent, as applicable, is a party, the performance by such Seller and Parent, as applicable, of their obligations hereunder and thereunder and the consummation by such Seller and Parent of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of such Seller and Parent, as applicable. This Agreement has been duly executed and delivered by each Seller and Parent, and (assuming due authorization, execution and delivery by Buyer) this Agreement constitutes a legal, valid and binding obligation of each Seller and Parent, enforceable against each Seller and Parent, as applicable, in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a Proceeding at Law or in equity). When each of the Ancillary Agreements to which each Seller or Parent, as applicable, is a party has been duly executed and delivered by such Seller or Parent, as applicable (assuming due authorization, execution and delivery by each other party thereto), such Ancillary Agreement constitutes a legal and binding obligation of such Seller and Parent, as applicable, enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a Proceeding at law or in equity).

 

Section 4.03. No Conflicts; Consents. The execution, delivery and performance by Sellers of this Agreement and the Ancillary Agreements to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not: (a) result in a violation or breach of any provision of the certificate of incorporation or bylaws of Sellers or the organizational documents of the Purchased Subsidiary; (b) result in a material violation or breach of any provision of any Law or Governmental Order applicable to any Seller, the Purchased Subsidiary, the Business or the Transferred Assets; (c) except as set forth in Schedule 4.03, require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any Material Contract that constitutes a Transferred Contract or a material Permit to which a Seller or the Purchased Subsidiary is a party or by which such Seller, the Purchased Subsidiary or the Business is bound or to which any of the Transferred Assets are subject (including any Transferred Contract); or (d) result in the creation or imposition of any material Encumbrance other than Permitted Encumbrances on the Transferred Assets. Except as set forth in Schedule 4.03, no material consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to any Seller in connection with the execution and delivery of this Agreement or any of the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby.

 

 

Section 4.04. Financial Statements.

 

(a) Set forth on Schedule 4.04 are copies of the unaudited financial statements consisting of the statement setting forth the assets and liabilities of the Business as at December 31^st in each of the years 2019 and 2018 and the statement setting forth the gross revenue, net income and direct expenses for the years then ended (the “Unaudited Financial Statements”), and unaudited financial statements consisting of the statement setting forth the assets and liabilities of the Business as at June 30, 2020 and the statement setting forth the gross revenue, net income and direct expenses for the six (6) months then ended (the “Interim Financial Statements” and together with the Unaudited Financial Statements, the “Financial Statements”). The Financial Statements have been prepared in accordance with GAAP applied on a consistent basis throughout the period involved, subject, in the case of the Interim Financial Statements, to normal and recurring year-end adjustments (the effect of which will not be materially adverse). The Financial Statements are based on the books and records of the Business, and fairly presents, in all material respects, the financial condition of the Business as of the respective dates they were prepared and the results of the operations of the Business for the periods indicated. The statement of assets and liabilities of the Business as of December 31, 2019 is referred to herein as the “Statement of Assets and Liabilities” and the date thereof as the “Statement of Assets and Liabilities Date” and the statement of assets and liabilities of the Business as of June 30, 2020 is referred to herein as the “Interim Statement of Assets and Liabilities” and the date thereof as the “Interim Statement of Assets and Liabilities Date”.

 

(b) When prepared, the Business Audit shall not have any deviations from the Unaudited Financial Statements that are materially adverse to the Business.

 

(c) There are no liabilities, debts, obligations or Claims against the Business of any kind whatsoever of the type required to be disclosed on a statement of assets and liabilities prepared in accordance with GAAP other than (i) those reflected on the Statement of Assets and Liabilities as of the Statement of Assets and Liabilities Date to the extent and in the amounts so disclosed or reserved against; (ii) those which have arisen after the Interim Statement of Assets and Liabilities Date in the Ordinary Course of Business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of Law, or individually or in the aggregate, result in a Material Adverse Effect); (iii) those that constitute Excluded Liabilities; (iv) those incurred in connection with or arising out of the transactions contemplated by this Agreement; and (v) those which would not be material to the Business.

 

Section 4.05. Absence of Certain Changes, Events and Conditions. Except as contemplated by this Agreement or as set forth on Schedule 4.05, since December 31, 2019 until the date of this Agreement, Sellers have operated the Business in the Ordinary Course of Business in all material respects and there has not been, with respect to the Business, any:

 

(a) event, occurrence or development that has had a Material Adverse Effect;

 

(b) incurrence, assumption or guarantee of any Indebtedness;

 

 

(c) sale or other disposition of any of the assets that would have been Transferred Assets shown or reflected in the Balance Sheet, except for any such assets that would have been Transferred Assets having an aggregate value of less than $150,000;

 

(d) cancellation of any material debts or Claims or amendment, termination or waiver of any rights constituting Transferred Assets, except in the Ordinary Course of Business;

 

(e) except for the License Agreements and in connection with the sale of services in the Ordinary Course of Business, the transfer, assignment or grant of any exclusive license or sublicense of any material rights under or with respect to any Transferred Intellectual Property;

 

(f) abandonment or lapse of or failure to maintain in full force and effect any material Registered Intellectual Property included in the Owned Intellectual Property, except in the Ordinary Course of Business;

 

(g) material damage, destruction or loss, or any material interruption in use, of any Transferred Assets, whether or not covered by insurance;

 

(h) material capital expenditures which would constitute an Assumed Liability;

 

(i) adoption of any plan of merger, consolidation, reorganization, liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against the Business under any similar Law; or

 

(j) any agreement to do any of the foregoing, or any action or omission that would result in any of the foregoing.

 

Section 4.06. Material Contracts.

 

(a) Excluding any Contract that is an Excluded Asset or Excluded Liability, Schedule 4.06(a) lists each of the following Contracts to which any Seller or the Purchased Subsidiary is a party or by which it is bound in connection with the Business or the Transferred Assets (collectively, the “Material Contracts”):

 

(i) all Contracts involving aggregate consideration in excess of $150,000 and which, in each case, cannot be cancelled without penalty or without more than ninety (90) days’ notice;

 

(ii) all Contracts that relate to the sale of any of the Transferred Assets for consideration in excess of $150,000, other than customer Contracts incurred in the Ordinary Course of Business;

 

(iii) (A) any material licenses or other rights granted to any Person with respect to Transferred Technology, and (B) all material Intellectual Property Licenses, other than (i) shrink-wrap, click-wrap and off-the-shelf Software licenses, and other licenses of Software that is commercially available to the public generally, with licenses, maintenance, support and other fees of $100,000 or less, and (ii) non-exclusive license agreements entered into in the Ordinary Course of Business, including Existing Contracts (as defined in the Buyer Software License Agreement);

 

 

(iv) all Contracts that provide for exclusive rights for the benefit of any Third Party, grants “most favored nation” status, contains minimum volume or purchase commitments, or requires a Seller to provide any minimum level of service, in each case which are material to the Business, taken as a whole;

 

(v) other than indemnification of directors, officers or employees of the Business under the applicable Law or the governing documents of Sellers and/or its Affiliates, all Contracts that provide for the indemnification of any Person or the assumption of any Liability of any Person;

 

(vi) all Contracts that relate to the acquisition of any business, a material amount of stock or assets of any other Person or any real property (whether by merger, sale of stock, sale of assets or otherwise) within the last two (2) years or that have any surviving obligations;

 

(vii) all material distributor, agency, sales promotion, market research, marketing consulting and advertising Contracts;

 

(viii) all Contracts with any Governmental Authority;

 

(ix) all Contracts that limit or purport to limit the ability of any Seller to compete in any line of business or with any Person or engage in any line of business within any geographic area or acquire the assets or securities of another Person, or otherwise materially restricts Sellers’ ability to solicit or hire any Person or solicit business from any Person, and each Contract that could require the disposition of any material assets or line of business of any Seller;

 

(x) all joint venture, partnership or similar Contracts;

 

(xi) all powers of attorney with respect to the Business or any Transferred Asset;

 

(xii) all Contracts between or among a Seller on the one hand and any Affiliate of a Seller on the other hand; and

 

(xiii) all collective bargaining agreements or Contracts with any labor organization, union or association.

 

(b) Each Material Contract is valid and binding on Sellers in accordance with its terms, and except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a Proceeding at Law or in equity), is in full force and effect in all material respects. No Seller or, to Sellers’ Knowledge, any other party thereto is in breach of or default under any Material Contract in any material respects, or has provided or received any notice of any intention to terminate, any Material Contract. No event or circumstance has occurred that, with notice or lapse of time or both, would constitute an event of default under any Material Contract in any material respect or result in a termination thereof or would cause or permit the acceleration or other changes of any right or obligation or the loss of any benefit thereunder. Except as set forth on Schedule 4.06(b) which contains only Intellectual Property Licenses (such Contracts set forth on Schedule 4.06(b), each a “Post-Signing Contract” and collectively, the “Post-Signing Contracts”), complete and correct copies of each Material Contract (including all modifications, amendments and supplements thereto and waivers thereunder) have been made available to Buyer.

 

 

Section 4.07. Transferred Assets.

 

(a) Each Seller has good and valid title to, or a valid leasehold interest in, all of the Transferred Assets, free and clear of Encumbrances except for Permitted Encumbrances, except as would not be material to the Business or the Transferred Assets.

 

(b) The Transferred Assets that are physical assets are in good operating condition and repair in all material respects, reasonable wear and tear excepted. Except as set forth on Schedule 4.07(b), the Transferred Assets that will be owned, leased or licensed by Buyer or the Purchased Subsidiary immediately following the Closing, together with any services provided by Sellers pursuant to the Transition Services Agreement, Intellectual Property provided pursuant to the License Agreements and any other Ancillary Agreement, (A) will constitute all of the assets (tangible or intangible) that are necessary to or used in the conduct of the Business as it is conducted as of the Closing in all material respects and (B) will permit Buyer to operate the Business in all material respects in the manner in which it is conducted as of the Closing.

 

Section 4.08. Real Property.

 

(a) There is no owned real property included in the Transferred Assets.

 

(b) Schedule 4.08(b) sets forth each parcel of real property leased by a Seller and used in or necessary for the conduct of the Business as currently conducted (the “Leased Real Property”), and a true and complete list of all leases and subleases, including all amendments, extensions renewals, guaranties and other agreements with respect thereto, pursuant to which a Seller holds any Leased Real Property (collectively, the “Leases”).

 

(c) The Sublease Agreement, when entered into at Closing by Buyer, shall be a valid and binding obligation.

 

Section 4.09. Intellectual Property.

 

(a) Schedule 4.09(a) sets forth a true and complete list of all (i) Registered Intellectual Property included in the Owned Intellectual Property, indicating for each item the registration or application number, the registration or application date, and the applicable filing jurisdiction and (ii) Owned Intellectual Property that is not registered but that is material to the operation of the Business. Sellers exclusively own all, right, title and interest in all Owned Intellectual Property, free and clear of all Encumbrances (other than Permitted Encumbrances). Sellers are not bound by any outstanding judgment, injunction, order or decree or any contractual obligation materially restricting the use by a Seller of the Owned Intellectual Property, or materially restricting the licensing thereof to any Person. With respect to the Registered Intellectual Property included in the Owned Intellectual Property listed on Schedule 4.09(a), (i) all such Registered Intellectual Property is subsisting and, to Sellers’ Knowledge, valid and enforceable, (ii) a Seller is the owner of record, and (iii) all maintenance fees and filings that are required to be made to maintain such Registered Intellectual Property have been timely made (taking into account any applicable grace periods).

 

 

(b) Schedule 4.09(b) sets forth, or at the Closing will set forth, a true and complete list of all Intellectual Property Licenses. Except as set forth on Schedule 4.09(b), Sellers have provided Buyer with true and complete copies of all such Intellectual Property Licenses. All such Intellectual Property Licenses are, to Sellers’ Knowledge, valid, binding and enforceable between the applicable Seller and the other parties thereto, and Seller and, to Sellers’ Knowledge, such other parties are in compliance with the material terms and conditions of such Intellectual Property Licenses.

 

(c) To Sellers’ Knowledge, the conduct of the Business as currently conducted does not infringe, misappropriate, dilute or otherwise violate, and in the past three (3) years has not infringed, misappropriated or otherwise violated, any Intellectual Property rights of any Third Party. Sellers have not received any notice that Sellers’ use of the Transferred Intellectual Property in the conduct of the Business as currently conducted infringes, misappropriates, dilutes or otherwise violates, or in the past three (3) years has infringed, misappropriated or otherwise violated, any Intellectual Property Rights of any Third Party. No Proceedings are pending and no written notices have been received by Sellers during the past three (3) years (or earlier, if presently not resolved), in each case, alleging any infringement, misappropriation or other violation by Sellers of the Intellectual Property rights of any Third Party. Except as set forth in Schedule 4.09(c), to Sellers’ Knowledge, during the past three (3) years (or earlier, if presently not resolved) no Person has infringed, misappropriated, diluted or otherwise violated any of the Owned Intellectual Property or Transferred Technology, and no Seller has made or asserted any claim, demand or notice against any person or entity alleging any such infringement, misappropriation, dilution or other violation. There is no Proceeding pending or, to Sellers’ Knowledge, threatened, challenging a Seller’s ownership of any Owned Intellectual Property, or its right to use any Transferred Intellectual Property, or challenging the validity, registrability, or enforceability of any Registered Intellectual Property included in the Owned Intellectual Property.

 

(d) Sellers represent that they are, each as applicable, the registrant of record of each domain name as set forth in Schedule 4.09(d) (collectively, the “Domain Names”).

 

(e) Sellers have taken commercially reasonable measures to protect the confidentiality of all Trade Secrets included in the Owned Intellectual Property and no material Trade Secrets have been disclosed by Sellers to any Person except pursuant to written non-disclosure agreements or other obligations of confidentiality, and, to Sellers’ Knowledge, there has not been a breach of any such agreement or obligation by any such Person.

 

(f) To Seller’s Knowledge, Sellers have obtained from each Person (including current and former employees and independent contractors) who has created or developed for or on behalf of Sellers any Owned Intellectual Property that is material to the Business a written, present and, valid assignment of such Intellectual Property to a Seller.

 

 

(g) To Sellers’ Knowledge, in the past three (3) years, there has been no material unauthorized access to or material unauthorized use of any confidential or proprietary information or data that is both in Sellers’ possession or control and material to the Business.

 

(h) With respect to any material Software included within the Transferred Intellectual Property, to Sellers’ Knowledge (i) such Software is free from any material bugs, viruses or other malicious code, (ii) the Source Code for such Software has not been disclosed to any Third Party, and (iii) such Software does not contain, derive from or link to any open source Software in a manner that requires the disclosure of any proprietary Source Code, limits the ability to charge fees, or grants any license to any Third Party to make derivative works.

 

(i) Neither the execution, delivery or performance of this Agreement, nor the consummation of the transactions contemplated by the Ancillary Agreements will result in the material loss or impairment of any of the Owned Intellectual Property.

 

(j) All third-party code that is incorporated into the proprietary Software included in the Transferred Intellectual Property and that is critical to the operation of such Software is commercially available (each a “Critical IP License” and collectively “Critical IP Licenses”), and following Closing, Buyer will be able to procure a license for all such third-party code for (i) an aggregate amount during the one-year period immediately following the Closing that shall not exceed the amount reflected for such third-party code in the Unaudited Financial Statements by more than $200,000, and (ii) an aggregate amount during the twelve (12) months period following the initial one-year period immediately following Closing that shall not exceed the amount reflected for such third-party code in the Unaudited Financial Statements by more than $200,000; provided that any increases in license fees resulting from a volume increase, additional licenses or other change in the operation of Business post Closing shall not be breaches of this representation.

 

(k) Buyer and Sellers agree that the representations and warranties included in this Section 4.09 shall be the sole and exclusive representations and warranties of Sellers with respect to Intellectual Property matters in this Agreement.

 

Section 4.10. Data Protection.

 

(a) During the past three (3) years, Sellers have (i) complied in all material respects with all publicly-facing statements or policies, contractual obligations, and all applicable Laws, in each case, regarding privacy, cyber security, data security and the collection, retention, protection, transfer, use and processing of Personal Information relating to the Business except as, individually or in the aggregate, would not reasonably be expected to be material to the Business, and (ii) implemented and maintained commercially reasonable administrative, technical and physical safeguards designed to protect Personal Information relating to the Business against unauthorized access, use, loss and damage.

 

(b) During the past three (3) years, (i) to Sellers’ Knowledge, there has been no unauthorized access to, or misuse of, any Personal Information relating to the Business maintained by or on behalf of Sellers except as, individually or in the aggregate, would not reasonably be expected to be material to the Business, and (ii) no Person (including any Governmental Authority) has made any claim or commenced any Proceeding with respect to any unauthorized access to, or misuse of, any Personal Information relating to the Business maintained by or on behalf of Sellers except as, individually or in the aggregate, would not reasonably be expected to be material to the Business.

 

 

Section 4.11. Legal Proceedings; Governmental Orders. Except as set forth in Schedule 4.11, there are no material Claims pending or, to Sellers’ Knowledge, threatened against or by Sellers (a) relating to or affecting the Business, the Purchased Subsidiary, the Transferred Assets or the Assumed Liabilities; or (b) that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. There are no outstanding Governmental Orders and no material unsatisfied judgments, penalties or awards against or affecting the Business or the Transferred Assets.

 

Section 4.12. Compliance with Laws; Permits.

 

(a) Sellers (i) are not in violation of any Law in any material respect with regard to their ownership or operation of the Transferred Assets or the Business, (ii) during the past three (3) years have not received any written notice of any alleged violation of, or any written citation for noncompliance with, any Law in any material respects with regard to its ownership or operation of the Transferred Assets or the Business and (iii) are in compliance in all material respects with all Laws applicable to the conduct of the Business as currently conducted.

 

(b) As set forth in Schedule 4.12(b), all material Permits required for each Seller to conduct the Business as currently conducted or for the ownership and use of the Transferred Assets have been obtained by such Seller or its Affiliates and are valid and in full force and effect. All fees and charges with respect to such Permits as of the date of the Original Agreement have been paid in full, except as would not be material to the Business. Schedule 4.12(b) lists all current material Permits issued to Sellers as of the date of the Original Agreement which are related to the conduct of the Business as currently conducted or the ownership and use of the Transferred Assets, including the names of the Permits and their respective dates of issuance and expiration. During the past three (3) years, to the Sellers’ Knowledge, no event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Permit set forth in Schedule 4.12(b).

 

Section 4.13. Environmental Matters. The operations of Sellers with respect to the Business and the Transferred Assets are in compliance in all material respects with all environmental Laws. During the past three (3) years, Sellers have not received from any Person, with respect to the Business or the Transferred Assets, any: (a) written notice of or Claim relating to actual or alleged non-compliance with any environmental Law; or (b) written request for information pursuant to environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing material obligations or requirements as of the Closing Date.

 

 

Section 4.14. Employee Benefit Matters.

 

(a) Schedule 4.14(a) includes a correct and complete list, as of the date of the Original Agreement, of each material Benefit Plan (excluding any offer letters and employment and service Contracts between any Sellers or any of their Affiliates and a Business Employee.

 

(b) Except as would not reasonably be expected to result in material Liabilities to Buyer, each Benefit Plan has been established, administered and maintained in all material respects in accordance with its terms and in compliance with all applicable Laws (including ERISA and the Code). Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code (a “Qualified Benefit Plan”) has received a favorable and current determination letter from the Internal Revenue Service, or with respect to a prototype plan, can rely on an opinion letter from the Internal Revenue Service to the prototype plan sponsor, to the effect that such Qualified Benefit Plan is so qualified and that the plan and the trust related thereto are exempt from federal income taxes under Sections 401(a) and 501(a), respectively, of the Code, and to the Seller’s Knowledge, nothing has occurred that would reasonably be expected to cause the revocation of such determination letter from the Internal Revenue Service or the unavailability of reliance on such opinion letter from the Internal Revenue Service, as applicable.

 

(c) Except as would not reasonably be expected to result in any Liabilities to Buyer, neither Sellers nor any of their ERISA Affiliates has in the past six (6) years (i) incurred or reasonably expects to incur, any material Liability under Title IV of ERISA relating to any Benefit Plan (including any withdrawal liability); (ii) withdrawn from any Multiemployer Plan; (iii) engaged in any transaction which would give rise to any Liabilities under Section 4069 or Section 4212(c) of ERISA; (iv) has had any assets subject to a lien for unpaid contributions to any Benefit Plan subject to Title IV of ERISA; (v) has in any material respect violated Section 4980B of the Code or Parts 6 or 7 of Title I of ERISA; or (vi) has failed to pay premiums to the Pension Benefit Guaranty Corporation when due with respect to any Benefit Plan subject to Title IV of ERISA.

 

(d) With respect to each Benefit Plan, (i) no such plan is or was within the past six (6) years a “multiple employer plan” within the meaning of Section 413(c) of the Code or a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA); (ii) no Claim has been initiated by the Pension Benefit Guaranty Corporation to terminate any such plan or to appoint a trustee for any such plan; (iii) no such plan has failed to meet the minimum funding standards of Section 302 of ERISA or Section 412 of the Code; and (iv) no such plan has maintained, sponsored, contributed to or had any obligation to contribute to any voluntary employees’ beneficiary association described under Section 501(c)(9) of the Code or any other welfare benefit fund described under Section 419 or 419A of the Code.

 

(e) Other than as required under Section 601 et. seq. of ERISA or other applicable Law, individual employment or similar Contracts (each of which is set forth on Schedule 4.14(a)) or as would not reasonably be expected to result in Liability to Buyer, no Benefit Plan provides post-termination or retiree welfare benefits to any Business Employee for any reason.

 

(f) Except as would not reasonably be expected to result in material Liability to Buyer, there is no pending or, to Sellers’ Knowledge, threatened material Claim relating to a Business Employee’s participation or rights under a Benefit Plan (other than routine claims for benefits).

 

(g) Each Benefit Plan that is subject to Section 409A of the Code has been operated in material compliance with such section and all applicable regulatory guidance (including, notices, rulings and final regulations) with respect to participation by any Business Employee.

 

 

Section 4.15. Employment Matters.

 

(a) Sellers have made available to Buyer a list of all persons who are Business Employees as of the date of the Original Agreement, which sets forth for each such individual the following: (i) title or position (including whether full or part time); (ii) hire date; (iii) current annual base compensation rate; and (iv) commission, bonus or other incentive-based compensation eligibility.

 

(b) (i) Sellers are not a party to or bound by any collective bargaining agreement with respect to the Business; (ii) the Business has not experienced any material strike, lockout, organized labor slowdown or work stoppage within the past three (3) years, (iii) no formal, written complaint against any Seller is pending or, to Sellers’ Knowledge, threatened before the National Labor Relations Board, the Equal Employment Opportunity Commission or any similar Governmental Authority by or on behalf of any Business Employee, and (iv) to Sellers’ Knowledge, no organizational effort is presently being made or threatened by or on behalf of any labor union with respect to the Business Employees.

 

(c) Sellers are in compliance in all material respects with all applicable Laws pertaining to employment and employment practices to the extent they relate to the Business Employees, including all such applicable Laws relating to collective bargaining, human rights, affirmative action and worker classification.

 

Section 4.16. Taxes.

 

(a) Except for matters that will not result in any material Encumbrance on the Transferred Assets or in any material liability for Taxes for which Buyer or its Affiliates will be responsible: (i) all Tax Returns required to be filed by or on behalf of a Seller with respect of the Transferred Assets on or prior to the date of the Original Agreement have been timely filed and are complete and accurate in all material respects; (ii) all material Taxes due and owing by a Seller with respect to the Transferred Assets have been paid or adequately accrued by Sellers, except for any such Taxes that are being properly contested and that are adequately accrued for by Sellers; (iii) all material Taxes required to be withheld and remitted by each Seller under any applicable Law with respect to the Business or the Transferred Assets have been withheld and remitted to the proper Taxing authority; (iv) all deficiencies asserted, or assessments made, against any Seller with respect material Taxes related to the Transferred Assets have been fully paid; (v) such Seller is not a party to any material Claim by a Taxing authority with respect to the Transferred Assets, and there are no material pending claims by any Taxing authority with respect to the Transferred Assets.

 

(b) No claim has been made in writing by any Taxing authority in a jurisdiction where a Seller or the Purchased Subsidiary does not file Tax Returns that such Seller or the Purchased Subsidiary is or may be subject to material taxation with respect to the Business or the Transferred Assets in that jurisdiction, which claim has not been resolved and, if applicable, paid.

 

(c) All material Tax Returns required to have been filed by the Purchased Subsidiary have been filed, and all such Tax Returns are complete and accurate in all material respects.

 

 

(d) The Purchased Subsidiary has paid all material Taxes required to have been paid by it, and the Purchased Subsidiary has complied in all material respects with Laws relating to the withholding and remittance of Taxes.

 

(e) There are no audits, examinations or other proceedings pending regarding material Taxes owed by the Purchased Subsidiary. No deficiency with respect to any material amount of Taxes has been assessed against the Purchased Subsidiary.

 

(f) There are no material Tax liens on the assets of the Purchased Subsidiary.

 

(g) The Purchased Subsidiary is, and always has been, treated as a disregarded entity (owned by RCOCI) for federal, state, local and foreign income Tax purposes.

 

(h) The transfer of Transferred Assets by RCIL (or any other person that is not a United States person) (i) will not include a transfer of any U.S. real property interest (as such term is used in Section 897 of the Code); (ii) will not be subject to tax withholding under section 1446 of the Code, or otherwise.

 

(i) Buyer and Sellers agree that the representations and warranties included in this Section 4.16 (i) along with the Tax representations included in Section 4.14 that specifically pertain to Taxes, shall be the sole and exclusive representations and warranties of Sellers with respect to Tax matters in this Agreement, and (ii) may only be relied upon for purposes of Tax liabilities relating to taxable periods (or portions thereof) ending on or before the Closing Date, and (iii) may not be relied upon for purposes of any Tax positions that Buyer or any of its Affiliates may take in respect of Tax periods (or portions thereof) beginning after the Closing Date.

 

Section 4.17. Accounts Receivable. The accounts receivable reflected on the Interim Statement of Assets and Liabilities and the accounts receivable arising after the date thereof through the Closing Date related to the Business have arisen from bona fide transactions entered into by Sellers involving the sale of goods or the rendering of services in the Ordinary Course of Business.

 

Section 4.18. Customers and Suppliers.

 

(a) Schedule 4.18(a) sets forth with respect to the Business the top ten (10) customers for the trailing twelve-month period ending June 30, 2020 (collectively, the “Material Customers”). Sellers have not received any written notice, that any of the Material Customers has ceased, or intends to cease after the Closing, to use the goods or services of the Business or to otherwise terminate or materially reduce its relationship with the Business.

 

(b) Schedule 4.18(b) sets forth with respect to the Business the top ten (10) suppliers for the six-month period ending June 30, 2020 (collectively, the “Material Suppliers”) based on outstanding account payable balances as of such time. Sellers have not received any written notice, that any of the Material Suppliers has ceased, or intends to cease, to supply goods or services to the Business or to otherwise terminate or materially reduce its relationship with the Business.

 

 

Section 4.19. Transactions with Affiliates. Except as set forth on Schedule 4.19, no Affiliate of Sellers: (a) will be a party to any Transferred Contract after the Closing and the transfer of such Transferred Contract to Buyer; or (b) except for the services or resources provided under the Transition Services Agreement and the License Agreements, after the Closing will provide services or resources to the Business.

 

Section 4.20. Brokers. Except as set forth on Schedule 4.20, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any Ancillary Agreement based upon arrangements made by or on behalf of Sellers or Parent.

 

Section 4.21. Information Supplied. None of the information supplied by any Seller or any of its Affiliates for inclusion or incorporation by reference into the Proxy Statement shall, at the time the Proxy Statement is first mailed to the stockholders of Buyer or at the time of any meeting of Buyer’s stockholders to be held in connection with the transactions contemplated by this Agreement, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading.

 

Section 4.22. No Other Representations and Warranties.

 

(a) Except for the representations and warranties contained in this Article IV (including the related portions of the Seller Disclosure Schedules), no Seller nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Sellers, including any representation or warranty as to the accuracy or completeness of any information regarding the Business and the Transferred Assets furnished or made available to Buyer and its Representatives or any information, documents or material delivered to Buyer or made available to Buyer, management presentations or in any other form in expectation of the transactions contemplated hereby or as to the future revenue, profitability or success of the Business, or any representation or warranty arising from statute or otherwise in law. Sellers hereby disclaim any other representations or warranties that would otherwise be deemed to be made by it, its Affiliates or any of their respective officers, directors, employees, agents, financial and legal advisors or other representatives, in connection with this Agreement or the transaction contemplated hereby.

 

(b) EXCEPT FOR ANY REPRESENTATIONS AND WARRANTIES EXPRESSLY SET FORTH IN ARTICLE IV, THE TRANSFERRED ASSETS ARE BEING ACQUIRED “AS IS, WHERE IS,” AND SELLERS AND THEIR RESPECTIVE AFFILIATES EXPRESSLY DISCLAIM ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO LIABILITIES, OPERATIONS OF THE BUSINESSES, OR THE TRANSFERRED ASSETS (INCLUDING TITLE, CONDITION, VALUE OR QUALITY THEREOF) OR THE PROSPECTS (FINANCIAL AND OTHERWISE), RISKS AND OTHER INCIDENTS OF THE TRANSFERRED ASSETS, AND SELLERS AND THEIR RESPECTIVE AFFILIATES EXPRESSLY DISCLAIM, AND BUYER HEREBY WAIVES, ANY REPRESENTATION OR WARRANTY OF QUALITY, MERCHANTABILITY, NON-INFRINGEMENT, USAGE, OR SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE TRANSFERRED ASSETS, OR ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR AS TO THE CONDITION OF THE TRANSFERRED ASSETS, IN EACH CASE EXCEPT AS EXPRESSLY SET FORTH HEREIN. NO MATERIAL OR INFORMATION PROVIDED BY OR COMMUNICATIONS MADE BY OR ON BEHALF OF SELLERS OR THEIR RESPECTIVE AFFILIATES OR BY ANY REPRESENTATIVE, AGENT, ATTORNEY, ADVISOR, CONSULTANT, ACCOUNTANT, BROKER OR INVESTMENT BANKER, INCLUDING ANY INFORMATION OR MATERIAL CONTAINED IN THE DESCRIPTIVE MEMORANDUM OR MANAGEMENT PRESENTATION RECEIVED BY BUYER, ITS AFFILIATES OR THEIR RESPECTIVE REPRESENTATIVES (INCLUDING ANY SUPPLEMENTS), INFORMATION PROVIDED DURING DUE DILIGENCE, INCLUDING INFORMATION IN THE ELECTRONIC DATA ROOM, AND ANY ORAL, WRITTEN OR ELECTRONIC RESPONSE TO ANY INFORMATION REQUEST PROVIDED TO BUYER, ITS AFFILIATES OR THEIR RESPECTIVE REPRESENTATIVES, WILL CAUSE OR CREATE ANY WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF THE TRANSFERRED ASSETS THAT IS NOT SET FORTH HEREIN.

 

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

 

Except as set forth in the Buyer Disclosure Schedules, Buyer represents and warrants to Sellers as of the date of the Original Agreement (provided that references to “this Agreement” shall be deemed to reference the “Original Agreement”) and as of the Closing Date as follows:

 

Section 5.01. Organization. Buyer is a corporation duly formed, validly existing and in good standing under the laws of the jurisdiction of its organization.

 

Section 5.02. Authority of Buyer.

 

(a) Buyer has all necessary corporate power and authority to enter into this Agreement and the Ancillary Agreements to which Buyer is a party, and subject to Requisite Buyer Stockholder Approval, to carry out its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Buyer of this Agreement and any Ancillary Agreement to which Buyer is a party, the performance by Buyer of its obligations hereunder and thereunder and the consummation by Buyer of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Buyer. This Agreement has been duly executed and delivered by Buyer, and (assuming due authorization, execution and delivery by Sellers) this Agreement constitutes a legal, valid and binding obligation of Buyer enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a Proceeding at law or in equity). When each Ancillary Agreement to which Buyer is a party has been duly executed and delivered by Buyer (assuming due authorization, execution and delivery by each other party thereto), such Ancillary Agreement constitutes a legal and binding obligation of Buyer enforceable against it in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforcement is sought in a Proceeding at law or in equity).

 

 

(b) The Buyer Board has (which has not been subsequently rescinded or modified): (i) approved the Original Agreement (including any amendments, including this Agreement) and the transactions contemplated thereby; (ii) determined that, as of the date of the Original Agreement, the Original Agreement (including any amendments, including this Agreement) and the transactions contemplated thereby are in the best interests of the holders of Common Stock and declared the advisability of the Original Agreement (including any amendments, including this Agreement); and (iii) recommended that such holders of Common Stock vote to approve the issuance of shares of Common Stock to Parent upon the conversion of the Debentures issuable to Parent hereunder and the exercise of the Warrants issuable to Parent hereunder, in each case in accordance with the terms thereof and directed that such matter be submitted for consideration by holders of Common Stock at a meeting of Buyer’s stockholders following the Closing (the “Buyer Board Recommendation”). The Requisite Buyer Stockholder Approval is the only vote of the holders of any shares of Common Stock necessary (under applicable Law or otherwise) for the conversion of the Debentures issuable to Parent hereunder and the exercise of the Warrants issuable to Parent hereunder.

 

Section 5.03. No Conflicts; Consents. The execution, delivery and performance by Buyer of this Agreement and the Ancillary Agreements to which it is a party, and the consummation of the transactions contemplated hereby and thereby, do not and will not: (a) result in a violation or breach of any provision of the certificate of incorporation or bylaws of Buyer; (b) result in a material violation or breach of any provision of any Law or Governmental Order applicable to Buyer; (c) except as set forth in Schedule 5.03, require the consent, notice or other action by any Person under, conflict with, result in a violation or breach of, constitute a default under or an event that, with or without notice or lapse of time or both, would constitute a default under, result in the acceleration of or create in any party the right to accelerate, terminate, modify or cancel any material Contract to which Buyer is a party; or (d) result in the creation or imposition of any material Encumbrance other than Permitted Encumbrances on any of the material assets or properties used in the operation of Buyer’s business. Except as set forth in Schedule 5.03, no material consent, approval, Permit, Governmental Order, declaration or filing with, or notice to, any Governmental Authority is required by or with respect to Buyer in connection with the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby.

 

Section 5.04. Brokers. Except for amounts due to Truist Securities, Inc., the fees of which are payable by Buyer, no broker, finder or investment banker is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated by this Agreement or any Ancillary Agreement based upon arrangements made by or on behalf of Buyer.

 

Section 5.05. Legal Proceedings. There are no Claims pending or, to Buyer’s knowledge, threatened against or by Buyer or any Affiliate of Buyer that challenge or seek to prevent, enjoin or otherwise delay the transactions contemplated by this Agreement. There are no outstanding Governmental Orders and no material unsatisfied judgments, penalties or awards against or affecting the business of Buyer.

 

 

Section 5.06. Capitalization of Buyer.

 

(a) The authorized capital stock of Buyer consists of 500,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock. As of June 30, 2020, (A) 19,635,830 shares of Common Stock were issued and outstanding and (B) no shares of Preferred Stock were issued and outstanding. All outstanding shares of Common Stock are validly issued, fully paid, nonassessable and free of any preemptive rights.

 

(b) Except as set forth in Schedule 5.06(b), there are (i) no outstanding shares of Common Stock of, or other equity or voting interest in, Buyer; (ii) no outstanding securities of Buyer convertible into or exchangeable for share capital of, or other equity or voting interest in, Buyer; (iii) no outstanding options, stock appreciation rights, warrants, restricted share units, rights or other commitments or agreements to acquire from Buyer, or that obligate Buyer to issue, any share capital of, or other equity or voting interest in, or any securities convertible into or exchangeable for share capital of, or other equity or voting interest in, Buyer; (iv) no obligations of Buyer to grant, extend or enter into any subscription, warrant, right, convertible or exchangeable security or other similar agreement or commitment (whether payable in equity, cash or otherwise) relating to any share capital of, or other equity or voting interest (including any voting debt) in, Buyer (the items in clauses (i), (ii), (iii) and (iv), together with the share capital of Buyer, being referred to collectively as “Buyer Securities”) and (v) no other obligations by Buyer or any of its Subsidiaries to make any payments based on the price or value of Buyer Securities. There are no outstanding Contracts of any kind which obligate Buyer or any of its Subsidiaries to repurchase, redeem or otherwise acquire any Buyer Securities.

 

(c) Neither Buyer nor any of its Subsidiaries is a party to any Contracts restricting the transfer of, relating to the voting of, requiring registration of, or granting any preemptive rights, anti-dilutive rights or rights of first refusal or similar rights with respect to any securities of Buyer.

 

(d) The Debentures and Warrants to be issued pursuant to the transactions contemplated by this Agreement pursuant to Section 2.06, and the shares of Common Stock issuable upon the conversion of such Debentures, and the exercise of such Warrants, will be, prior to the Closing, (i) duly authorized, validly issued, fully paid and nonassessable, and (ii) not subject to any Encumbrances other than under applicable securities Laws and the Investor Rights Agreement.

 

Section 5.07. Absence of Certain Changes, Events and Conditions. Except as contemplated by this Agreement, since December 31, 2019 until the date of this Agreement, there has not been, with respect to the businesses of Buyer and its Subsidiaries, any event, occurrence or development that has had a Buyer Material Adverse Effect.

 

 

Section 5.08. SEC Reports and Financial Statements.

 

(a) Since January 1, 2018, Buyer has filed or furnished all forms, documents and reports required to be filed or furnished by it with the SEC (all such documents and reports publicly filed or furnished by Buyer or any of its Subsidiaries, the “Buyer SEC Documents”). As of their respective dates or, if amended, as of the date of the last such amendment, the Buyer SEC Documents complied in all material respects with the requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the applicable rules and regulations promulgated thereunder, and none of the Buyer SEC Documents at the time they were filed or furnished contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. None of Buyer’s Subsidiaries is, or at any time has been, required to file any forms, reports or other documents with the SEC. True and correct copies of all Buyer SEC Documents filed prior to the date of the Original Agreement have been furnished to Sellers or are publicly available in the Electronic Data Gathering, Analysis and Retrieval (EDGAR) database of the SEC.

 

(b) The consolidated financial statements (including all related notes and schedules) of Buyer included in the Buyer SEC Documents (the “Buyer Financial Statements”) at the time they were filed or furnished (i) fairly present in all material respects the consolidated financial position of Buyer and its consolidated Subsidiaries, as at the respective dates thereof, and the consolidated results of their operations and their consolidated cash flows for the respective periods then ended (except, in the case of unaudited statements, subject to normal year-end audit adjustments, the absence of notes and to any other adjustments described therein, including in any notes thereto or with respect to pro forma financial information, subject to the qualifications stated therein), (ii) were prepared in conformity with GAAP applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and (iii) comply in all material respects with the applicable accounting requirements and with the rules and regulations of the SEC, the Exchange Act and the Securities Act. Set forth on Schedule 5.08(b) are copies of the unaudited financial statements consisting of the balance sheet of Buyer and its consolidated Subsidiaries as at June 30, 2020 and the related statements of income and retained earnings, stockholders’ equity and cash flow for the six (6) months then ended (the “Buyer Pro-Forma Financial Statements”). The Buyer Pro-Forma Financial Statements were prepared in conformity with GAAP applied on a consistent basis during the periods involved, subject, to normal and recurring year-end adjustments (the effect of which will not be materially adverse) and the absence of notes. The Buyer Pro-Forma Financial Statements are based on the books and records of Buyer’s business, and fairly presents, in all material respects, the financial condition of Buyer as of the respective dates they were prepared and the results of the operations of Buyer’s business for the periods indicated.

 

(c) As of the date of the Original Agreement, there are no outstanding or unresolved comments in any comment letters of the staff of the SEC received by Buyer relating to the Buyer SEC Documents. As of the date of the Original Agreement, none of the Buyer SEC Documents is, to Buyer’s knowledge, the subject of ongoing SEC review.

 

(d) Neither Buyer nor any of its Subsidiaries is a party to, nor does it have any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract (including any Contract relating to any transaction or relationship between or among Buyer or one of its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or person, on the other hand) or any “off-balance sheet arrangements” (as defined in Item 303(a) of Regulation S-K of the SEC), where the result, purpose or effect of such Contract is to avoid disclosure of any material transaction involving, or material Liabilities of, Buyer or any of its Subsidiaries in the Buyer Financial Statements or other Buyer SEC Documents.

 

 

Section 5.09. Internal Controls and Procedures. Buyer has established and maintains disclosure controls and procedures and internal control over financial reporting (as such terms are defined in paragraphs (e) and (f), respectively, of Rule 13a-15 under the Exchange Act) as required by Rule 13a-15 under the Exchange Act. Buyer’s disclosure controls and procedures are reasonably designed to ensure that all material information required to be disclosed by Buyer in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that all such material information is accumulated and communicated to Buyer’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications required pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. Buyer’s management has completed an assessment of the effectiveness of Buyer’s internal control over financial reporting in compliance with the requirements of Section 404 of the Sarbanes-Oxley Act for the year ended December 31, 2019, and such assessment concluded that such controls were effective. Based on its most recent evaluation of internal controls over financial reporting prior to the date of the Original Agreement, management of Buyer has disclosed to Buyer’s auditors and the audit committee of the board of directors of Buyer (the “Buyer Board”) (i) any significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting that are reasonably likely to adversely affect in any material respect Buyer’s ability to report financial information and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Buyer’s internal control over financial reporting, in each case, that was disclosed to Buyer’s auditors or the audit committee of the Buyer Board in connection with its most recent evaluation of internal controls over financial reporting prior to the date of the Original Agreement.

 

Section 5.10. Undisclosed Liabilities (a). There are no liabilities, debts, obligations or Claims against Buyer’s business of any kind whatsoever of the type required to be disclosed on a balance sheet prepared in accordance with GAAP other than (i) those reflected in the Buyer Financial Statements to the extent and in the amounts so disclosed or reserved against; (ii) those which have arising after June 30, 2020 in the Ordinary Course of Business (none of which results from, arises out of, relates to, is in the nature of, or was caused by any breach of contract, breach of warranty, tort, infringement, or violation of Law, or individually or in the aggregate, result in a Buyer Material Adverse Effect); and (iii) those which would not be material to the business of Buyer.

 

Section 5.11. Compliance with Laws; Permits.

 

(a) Buyer (i) is not in violation of any Law in any material respect with regard to its ownership or operation of its business, (ii) during the past three (3) years has not received any written notice of any alleged violation of, or any written citation for noncompliance with, any Law in any material respects with regard to its ownership or operation of its business, and (iii) is in material compliance with all Laws applicable to the conduct of its business as currently conducted.

 

(b) All material Permits required for Buyer to conduct the Buyer’s business as currently conducted have been obtained by Buyer and are valid and in full force and effect. All fees and charges with respect to such Permits as of the date of the Original Agreement have been paid in full, except where the failure to pay such fees and charges would not be material to the business of Buyer.

 

 

(c) Since January 1, 2016, (i) neither Buyer nor any of its Subsidiaries, and, to the knowledge of Buyer, no officer, director, employee, agent, representative or sales intermediary of Buyer or any of its Subsidiaries, in each case, acting on behalf of Buyer or any of its Subsidiaries, has violated any applicable anti-corruption Laws, (ii) neither Buyer nor any of its Subsidiaries has been convicted of violating any anti-corruption Laws or has been subjected to any investigation by a Governmental Authority for violation of any applicable anti-corruption Laws, (iii) neither Buyer nor any of its Subsidiaries has made a voluntary, directed, or involuntary disclosure to any Governmental Authority regarding any alleged act or omission arising under or relating to any noncompliance with any anti-corruption Laws and (iv) neither Buyer nor any of its Subsidiaries has received any written notice, request or citation for any actual or potential noncompliance with any of the foregoing, in each case, except as would not reasonably be expected to be material to Buyer and its Subsidiaries, taken as a whole.

 

Section 5.12. Information Supplied. The Proxy Statement shall not, at the time the Proxy Statement is first mailed to the stockholders of Buyer and at the time of any meeting of Buyer’s stockholders to be held in connection with the transactions contemplated by this Agreement, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, except that no representation or warranty is made by Buyer with respect to statements made (or incorporated by reference) therein based on information supplied by any Sellers or their respective Affiliates or their Representatives for inclusion (or incorporated by reference) therein.

 

Section 5.13. Tax Matters.

 

(a) Buyer and each of its Subsidiaries has filed all material Tax Returns required to be filed by or with respect to them and all such Tax Returns and true, correct and complete in all material respects.

 

(b) Buyer and each of its Subsidiaries have paid all material Taxes required to have been paid by or with respect to them, and Buyer and its Subsidiaries have complied in all material respects with Laws relating to the withholding and remittance of Taxes.

 

(c) There are no audits, examinations or other proceedings pending with respect to Taxes of Buyer or its Subsidiaries. No deficiency with respect to any material amount of Taxes has been assessed or threatened in writing against Buyer or any of its Subsidiaries.

 

(d) There are no material Tax liens on the assets of Buyer or its Subsidiaries.

 

(e) Since June 30, 2020, neither Buyer nor any of its Subsidiaries has incurred any material liability for Taxes outside the ordinary course of business.

 

(f) Neither Buyer nor any of its Subsidiaries has any liability for the Taxes of another person, whether under Law, by contract, as a successor or transferee, or otherwise (except, in each case, for any such liabilities pursuant to commercial contracts the primary purpose of which does not relate to taxes that were entered into with non-related parties in the ordinary course of business).

 

 

Section 5.14. Acknowledgement by Buyer. Except for the representations and warranties contained in Article IV (including the related portions of the Seller Disclosure Schedules) or the Ancillary Agreements, Buyer acknowledges that no Seller nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Sellers, including any representation or warranty as to the accuracy or completeness of any information regarding the Business and the Transferred Assets furnished or made available to Buyer and its Representatives any information, documents or material delivered to Buyer or made available to Buyer, management presentations or in any other form in expectation of the transactions contemplated hereby or as to the future revenue, profitability or success of the Business, or any representation or warranty arising from statute or otherwise in Law. Buyer, on behalf of itself and each of its Affiliates and its and their respective directors, officers, employees, stockholders, partners, members and other Representatives, acknowledges and agrees that (i) none of Buyer, any of its Affiliates and any of its and their respective directors, officers, employees, stockholders, partners, members and other Representatives, has relied on or is relying on any representation, warranty or statement of any kind by Sellers, or any of their respective Affiliates, agents or other Representatives, or any other Person, beyond those expressly given by in Article IV, including any implied warranty or representation as to condition, merchantability, suitability or fitness for a particular purpose or trade as to any of the Transferred Assets, and (ii) each Seller and each of its Affiliates, agents and other Representatives have specifically disclaimed and do hereby specifically disclaim any such representations or warranties made by any Person, beyond those expressly given in Article IV. Buyer understands and agrees that the Transferred Assets are furnished “as is”, “where is” and, subject only to the representations and warranties contained in Article IV, with all faults and without any other representation or warranty of any nature whatsoever.

 

Section 5.15. No Other Representations and Warranties. Except for the representations and warranties contained in this Article V (including the related portions of the Buyer Disclosure Schedules), neither Buyer nor any other Person has made or makes any other express or implied representation or warranty, either written or oral, on behalf of Buyer, including any representation or warranty as to the accuracy or completeness of any information regarding Buyer’s business furnished or made available to Sellers and their respective Representatives or any information, documents or material delivered to Sellers or made available to Sellers in expectation of the transactions contemplated hereby or as to the future revenue, profitability or success of Buyer’s business, or any representation or warranty arising from statute or otherwise in law. Buyer hereby disclaims any other representations or warranties that would otherwise be deemed to be made by it, its Affiliates or any of their respective officers, directors, employees, agents, financial and legal advisors or other representatives, in connection with this Agreement or the transaction contemplated hereby.

 

 

ARTICLE VI

COVENANTS

 

Section 6.01. Employees and Employee Benefits.

 

(a) Buyer shall offer employment (either directly from Buyer or through a professional employer organization), as soon as practicable after the Closing Date (and at least ten (10) Business Days prior to the Buyer Hiring Date), effective as of the Buyer Hiring Date, to each Business Employee (other than an UK Business Employee) who is employed (including any active or inactive Business Employees on vacation, holiday, jury duty, furlough or approved leave of absence or other similar absence) by Sellers or any of their respective Subsidiaries as of such date. For any Business Employee who is on short-term or long-term disability immediately prior to the Buyer Hiring Date, as soon as practicable after the Closing Date (and at least ten (10) Business Days prior to the Buyer Hiring Date), Buyer shall offer employment to such Business Employee, effective as of the date on which such Business Employee returns to active employment following the Buyer Hiring Date (provided that such return to active employment occurs within six (6) months following the Closing Date). Each offer of employment shall provide for terms and conditions of employment that are consistent with the level of compensation and benefits provided to such Business Employees as of the date of the Original Agreement (subject to adjustment as set forth in Section 6.02) and set forth each Transferred Employee’s continued eligibility to receive a bonus under the 2020 Bonus Plan. In addition, Buyer shall promptly provide Sellers with written notice of any Business Employee who rejects Buyer’s offer of employment (but in no event later than the earlier of (x) three (3) Business Days after Buyer receives notice of such rejection from such Business Employee or (y) three (3) Business Days prior to the Buyer Hiring Date). Buyer shall take reasonable actions, and shall work with Sellers in good faith, to encourage and ensure that each Business Employee receiving an offer in accordance with this Agreement, accepts such offer. The Parties acknowledge and agree that it is intended that the employment of the UK Business Employees shall transfer to Buyer or an Affiliate on the Buyer Hiring Date pursuant to TUPE on the same terms and conditions as applicable prior to the Closing Date. From and after the date of the Original Agreement until the Buyer Hiring Date, Buyer and Sellers shall cooperate in good faith regarding any communications to be distributed to any Business Employees relating to the transactions contemplated by this Agreement or post-Closing or post-Buyer Hiring Date terms of employment, and Buyer shall consult with Sellers and obtain Sellers’ consent, which consent shall not be unreasonably withheld, delayed or conditioned, before distributing any communications to any Business Employees or any union or other labor representative.

 

(b) With respect to each Transferred Employee, following the Buyer Hiring Date and until the five (5) month anniversary thereof (such period, the “Benefits Continuation Period”), Buyer shall, and shall cause its Affiliates to (and shall cause any other Person providing compensation and benefits on their behalf to): (i) provide no less favorable base salary, wage rates, cash bonus opportunity and severance eligibility, as applicable, than the base salary and wage rates of such Transferred Employee in effect immediately prior to the Buyer Hiring Date; and (ii) provide other compensation and employee benefits that are either (A) in the aggregate, no less favorable to Transferred Employees than the other compensation and employee benefits provided to similarly situated employees of Buyer and its Affiliates or (B) substantially comparable in the aggregate to the other compensation and employee benefits provided to such Transferred Employees immediately prior to the Buyer Hiring Date.

 

(c) With respect to any employee benefit plan, program or arrangement sponsored or maintained by Buyer or an Affiliate of Buyer (a “Buyer Plan”) for the benefit of any of its employees, effective either at or after the Buyer Hiring Date, Buyer shall, or shall cause its Affiliates to, (i) recognize all service of the Transferred Employees with Sellers and their Affiliates (including pursuant to the Transition Services Agreement), as if such service were with Buyer or its applicable Affiliate, for vesting and eligibility purposes to the extent that Buyer or its Affiliate offers such employee benefit plan or comparable employee benefit plan to Buyer’s existing employees as of the Buyer Hiring Date or thereafter, and for purposes of determining levels of benefits and benefit accrual for vacation and paid time off and severance; provided, however, that such service shall not be recognized to the extent that it would result in a duplication of benefits, (ii) use commercially reasonable efforts to waive any pre-existing condition exclusion, actively-at-work requirement or waiting period under all Buyer Plans that are employee health and other welfare benefit plans, except to the extent such pre-existing condition, exclusion, requirement or waiting period applied to such individual under the corresponding Benefit Plan, and (iii) use commercially reasonable efforts to provide credit for amounts paid by Transferred Employees under a Benefit Plan for the plan year in which Buyer initially enrolls Transferred Employees in a Buyer Plan for purposes of applying deductibles, co-payments and out of pocket maximums as though such amounts had been paid in accordance with the terms and conditions of a comparable Buyer Plan, to the same extent such credit was given under the applicable Benefit Plan immediately prior to the Closing.

 

 

(d) Without limiting obligations under Section 6.01(h) and Section 6.01(i), (i) (A) Buyer shall use reasonable best efforts to establish Buyer Plans in which the Transferred Employees who are not Non-NA Business Employees (such Transferred Employees, “NA Transferred Employees”) are eligible to participate by the Buyer Hiring Date and, if not so established, shall cause Buyer Plans in which the NA Transferred Employees are eligible to participate to be established as soon as practicable on or after the Buyer Hiring Date (but in no case later than March 1, 2021) and (B) Buyer shall establish Buyer Plans in which the Transferred Employees who are not NA Transferred Employees are eligible to participate by the Buyer Hiring Date (the date on which a Buyer Plan become effective, the “Buyer Plan Effective Date”) and (ii) pursuant to the Transition Services Agreement, Sellers shall continue to maintain eligibility of the NA Transferred Employees in each welfare Benefit Plan identified as a “Specified US Benefit Plan” (or comparable Canadian welfare Benefit Plan) on Exhibit A of the Transition Services Agreement, directly or through coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA)), until the Buyer Plan Effective Date for the Buyer Plan that provides for similar benefits under an applicable Benefit Plan (each such Benefit Plan, a “Corresponding Benefit Plan”). Effective as of a Buyer Plan Effective Date, the Transferred Employees shall cease active participation in such Corresponding Benefit Plan. Except any Assumed Liability or as otherwise set forth in the Transition Services Agreement, Sellers shall remain liable for all eligible claims for benefits under the Benefit Plans. Except as otherwise set forth herein (including Assumed Liabilities) or in the Transition Services Agreement, Buyer does not assume any Benefit Plans, and Sellers shall remain exclusively responsible for the funding, operation, and termination of all Benefit Plans.

 

(e) Buyer and Sellers intend that, and subject to any applicable Law, shall take all reasonable actions so that, the transactions contemplated by this Agreement should not constitute a separation, termination or severance of employment of any employee who accepts an employment offer, including for purposes of any Benefit Plan that provides for separation, termination or severance benefits and the WARN Act, and that each such employee will have continuous employment immediately before and immediately after the Buyer Hiring Date. Buyer shall be solely liable for all Liability in relation to compliance with the WARN Act triggered as a result of the “employment loss” (as such term is defined under the WARN Act) of any Transferred Employees on or following the Buyer Hiring Date, and will not take any action on or following the Buyer Hiring Date to trigger Liability under the WARN Act with respect to any Person employed by Sellers or their respective Subsidiaries who are not Transferred Employees. Parent and Sellers shall be solely liable for all Liability in relation to compliance with the WARN Act with respect to the Persons employed by Sellers or their respective Subsidiaries who are not Transferred Employees in connection with transactions contemplated by this Agreement (and any termination of employment related thereto), provided Buyer has complied with its covenants in Section 6.01(a).

 

(f) As of the Buyer Hiring Date, Buyer shall assume all liabilities associated with accrued vacation and paid time off balances of any Transferred Employees, solely to the effect the proposed vacation and paid time off are reflected as a Current Liability in Net Working Capital or otherwise accrued on or following the Closing Date (which for the avoidance of doubt will not be included as a Current Liability in Net Working Capital), and shall credit and honor, in accordance with the terms of the applicable policy of the applicable Seller or its Subsidiaries, all vacation days and other paid time off accrued but not yet taken by the Transferred Employees (and, in the event of any termination of employment of a Transferred Employee, Buyer will pay out all accrued, but unused vacation and paid time off to the applicable Transferred Employee).

 

 

(g) If the Buyer Hiring Date occurs before the date annual cash bonuses for fiscal year 2020 are paid to Transferred Employees under any Benefit Plan that is an annual cash incentive compensation plan or arrangement (collectively, the “2020 Bonus Plan”), (i) on or prior to the Closing Date, Sellers shall provide Buyer with a schedule of the estimated bonus amounts under the 2020 Bonus Plan that each Transferred Employee may be eligible to receive in respect of the pre-Closing Date Period (the “Pre-Closing Transferred Employee Bonus Schedule” and the aggregate amount of all estimated bonuses in such schedule delivered on or prior to the Closing Date, the “Estimated Pre-Closing Transferred Employee Bonus Amount”); (ii) following the Buyer Hiring Date and on or prior to March 10, 2021, Sellers shall provide to Buyer (A) an updated Pre-Closing Transferred Employee Bonus Schedule (the “Final Pre-Closing Transferred Employee Bonus Schedule”), which sets forth the final bonus amount under the 2020 Bonus Plan payable to each Transferred Employee in respect of the pre-Closing Date Period, in accordance with (and subject to the terms of) this Section 6.01(g) and the 2020 Bonus Plan (the aggregate amount of all such final bonuses to which Transferred Employees may become eligible under such updated Transferred Employee Bonus Schedule, the “Final Pre-Closing Transferred Employee Bonus Amount”), and (B) a schedule of the final bonus amounts under the 2020 Bonus Plan that each Transferred Employee may be eligible to receive in respect of the period between the Closing Date and the Buyer Hiring Date in accordance with (and subject to the terms of) this Section 6.01(g) and the 2020 Bonus Plan (such aggregate amount, the “Post-Closing Transferred Employee Bonus Schedule”) and (iii) Buyer shall or shall cause one of its Affiliates to pay each Transferred Employee a cash bonus under the 2020 Bonus Plan in an amount set forth on the updated Pre-Closing Transferred Employee Bonus Schedule and on the Post-Closing Transferred Employee Bonus Schedule in the ordinary course of business consistent with the past practice of the Business, and at substantially the same time as annual bonuses have historically been paid by the Business (but in no event later than March 15, 2021), provided that the applicable Transferred Employee remains employed by Buyer or one of its Affiliates through, and is in good standing with Buyer and its Affiliates as of, the date of payment of such bonus. To the extent that (x) the Final Pre-Closing Transferred Employee Bonus Amount (reduced by any amount not paid due to termination of employment or lack of good standing of a Transferred Employee prior to payment) is less than the Estimated Pre-Closing Transferred Employee Bonus Amount, Buyer shall promptly (and no later than five (5) Business Days after the Final Pre-Closing Transferred Employee Bonus Amount has been paid) pay the difference in cash to an account designated by Sellers by wire transfer of immediately available funds, or (y) the Final Pre-Closing Transferred Employee Bonus Amount (reduced by any amount not paid due to termination of employment or lack of good standing of a Transferred Employee prior to payment) is greater than the Estimated Pre-Closing Transferred Employee Bonus Amount, Sellers shall, in its sole discretion, either (I) promptly (and no later than March 15, 2021 (or such other date that Buyer and Parent mutually agree on which the Final Transferred Employee Bonus Amount is to be paid)) pay the difference in cash (such difference, the “Bonus Adjustment Amount”) to an account designated by Buyer by wire transfer of immediately available funds, (II) transfer to Buyer a number of shares of Common Stock issuable upon the conversion of the Debentures and shares of Common Stock issuable upon the exercise of the Warrants with a value equal to the Bonus Adjustment Amount (such value determined based on the VWAP of Buyer Closing Common Stock) or (III) surrender a number of Consideration Units to Buyer equal to the quotient of (A) the Bonus Adjustment Amount divided by (B) $1,000.00, with any fractional number of Units to be rounded down to the nearest whole number. For the avoidance of doubt, any bonuses paid by Buyer or any of its Affiliates to the Transferred Employees outside of the amounts contemplated by this Section 6.01(g) (including any bonuses in respect of any post-Closing period (including those set forth on the Post-Closing Transferred Employee Bonus Schedule)) shall not be taken into account for purposes of the immediately preceding two sentences or result in or affect any payment or transfer described above.

 

(h) As of the Buyer Hiring Date, Buyer shall maintain (or make available via a professional employer organization) a defined contribution retirement plan intended to qualify under Section 401(a) of the Code (the “Buyer 401(k) Plan”) (satisfactory evidence of which will be provided upon request by Sellers) for the benefit of those Transferred Employees who shall elect and are eligible to participate in the Buyer 401(k) Plan. As soon as reasonably practicable on or following the Buyer Hiring Date, but in no event later than sixty (60) days following the Buyer Hiring Date, Buyer shall, for those Transferred Employees who elect and are eligible to participate in the Buyer 401(k) Plan, allow such Transferred Employees to make a “direct rollover” to the Buyer 401(k) Plan of any account balance from a defined contribution retirement plan intended to qualify under 401(a) of the Code maintained by Sellers (the “Sellers’ 401(k) Plan”), and Buyer shall cause the Buyer 401(k) Plan to accept all account balances, and use reasonable best efforts to cause the Buyer 401(k) Plan to accept all outstanding loans, as rollover contributions. The Parties agree to cooperate in good faith and to take all necessary and appropriate actions to ensure that loans held by Transferred Employees under the Sellers’ 401(k) Plans do not default, offset, result in a deemed distribution or otherwise require repayment (other than pursuant to the payment schedule in effect for such loan) as a result of, or in connection with, the transactions contemplated by this Agreement or the termination of the Transferred Employees’ employment with Sellers and their Affiliates. As of the Buyer Hiring Date, Buyer shall provide the Transferred Employees with the opportunity to participate in a retirement savings program that provides benefits on a capital accumulation basis with employer and employee contribution levels that are substantially comparable to those available to such Transferred Employees under the Benefit Plan providing pension or retirement savings benefits in which the Transferred Employee participated immediately prior to the Buyer Hiring Date.

 

 

(i) Buyer shall implement a Buyer Plan (or make available via a professional employer organization) that is a flexible spending reimbursement accounts for (A) dependent care expenses under a cafeteria plan qualifying under Section 125 of the Code that provide benefits to Transferred Employees effective as of the Buyer Hiring Date, and (B) medical expenses under a cafeteria plan qualifying under Section 125 of the Code that provide benefits to NA Transferred Employees effective as soon as practicable (but in no event later than the Buyer Plan Effective Date for the Buyer Plans that are group health plans), in each case no less favorable in all material respects than those provided by the flexible spending reimbursement accounts for such expenses under the cafeteria plan in which Transferred Employees participate immediately prior to the Closing. For the avoidance of doubt, Buyer’s cafeteria plan qualifying under Section 125 of the Code shall, effective as of the Buyer Hiring Date, provide for pre-tax deductions for premium payments to any Benefit Plans in which NA Transferred Employees participate on or after the Buyer Hiring Date and prior to the Buyer Plan Effective Date.

 

(j) This Section 6.01 shall be binding upon and inure solely to the benefit of each of the Parties to this Agreement, and nothing in this Section 6.01, express or implied, shall confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Section 6.01 (including any third party beneficiary rights). Nothing contained herein, express or implied, shall be construed to establish, amend or modify any benefit plan, program, agreement or arrangement. The Parties acknowledge and agree that the terms set forth in this Section 6.01 shall not create any right in any Transferred Employee or any other Person to any continued employment with Buyer or any of its Affiliates or compensation or benefits of any nature or kind whatsoever.

 

Section 6.02. Conduct of the Business Prior to Closing; Conduct of Buyer Prior to Closing.

 

(a) Except (i) as set forth in Schedule 6.02(a), (ii) as required by applicable Law (including any COVID-19 Measures), (iii) as consented to in writing by Buyer (which consent shall not unreasonably be withheld, delayed or conditioned), (iv) as otherwise contemplated or required by the terms of this Agreement, or (v) for actions taken during any period of full or partial suspension of operations related to the COVID-19 pandemic that are reasonably necessary to (A) protect the health and safety of the employees of the Business or other business counterparties of Sellers, or (B) respond to third-party supply or service disruptions caused by the COVID-19 pandemic, from the date of the Original Agreement until the earlier of the termination of this Agreement and the Closing, Sellers shall: (a) operate the Business in all material respects in the Ordinary Course of Business; and (b)  use commercially reasonable efforts to (i) maintain and preserve the Business in all material respects and (ii) preserve and maintain all material Permits required for the conduct of the Business as currently conducted or the ownership and use of the Transferred Assets or the Purchased Subsidiary.

 

(b) From the date of the Original Agreement to the earlier of the termination of this Agreement and the Closing, except (i) for actions taken during any period of full or partial suspension of operations related to the COVID-19 pandemic that are reasonably necessary to (A) protect the health and safety of the employees of the Business or other business counterparties of Sellers, or (B) respond to third-party supply or service disruptions caused by the COVID-19 pandemic, (ii) as set forth in Schedule 6.02(b), (iii) as required by applicable Law (including any COVID-19 Measures), (iv) as consented to in writing by Buyer (which consent shall not unreasonably be withheld, delayed or conditioned), or (v) as otherwise contemplated or required by the terms of this Agreement, no Seller shall, and shall not permit its controlled Affiliates to, do any of the following with respect to the Business, the Transferred Assets or the Assumed Liabilities:

 

(i) undertake any merger, spin-off, contribution of assets or other form of similar reorganization with respect to the Transferred Assets, other than such transactions by and among Sellers and their Affiliates;

 

 

(ii) (A) increase the base salary or base wage, bonus, incentive or other compensation, pension, welfare, fringe or other benefits, severance or termination pay of any Transferred Employee whose annual base compensation exceeds $100,000, other than (x) in the Ordinary Course of Business (including in connection with any promotions or change in position or job responsibilities), or as may be required by an applicable Benefit Plan or applicable Law, or (y) the adoption, amendment, termination or other modification of any Benefit Plan that is not intended to materially and disproportionately affect any Business Employees, (B) hire any officer or senior management employee whose annual base compensation exceeds $100,000, except in the Ordinary Course of Business, or (C) terminate any Business Employee whose annual base compensation exceeds $100,000 (other than for cause); provided that, notwithstanding anything to the foregoing in clauses (A), (B) or (C), Sellers and their Affiliates shall not be restricted from implementing, extending, modifying or terminating any changes to the compensation structure of the Business or the Business Employees that have been made prior to the Closing Date as a result of or otherwise in relation to the COVID-19 pandemic;

 

(iii) enter into, renew or allow the renewal of, any written employment or consulting agreement or other written contract or arrangement with respect to the performance of personal services directly for the benefit of the Business unless cancelable without penalty on less than 30 days’ notice or requiring the payment of less than $100,000 in base salary or consulting fees per annum;

 

(iv) sell, license, lease or otherwise dispose of, or abandon, cancel, or allow to lapse or expire any Transferred Assets which are material, individually or in the aggregate, to such Business, except for (A) sales, non-exclusive licenses, leases, or other dispositions of Intellectual Property in the Ordinary Course of Business or (B) assets that are obsolete or no longer used in such Business;

 

(v) waive, release, grant or transfer any right of material value solely to the extent relating to any Transferred Asset or any Assumed Liability, other than rights that constitute Excluded Assets;

 

(vi) (A) subject to Section 6.13, amend any material term of, waive any material right under, or voluntarily terminate (other than upon expiration in accordance with its terms) any Material Contract, or (B) enter into any Contract that would be a Material Contract if entered into prior to or on the date of the Original Agreement, other than, in the case of clause (B), in the Ordinary Course of Business; or

 

(vii) authorize or otherwise commit to take any of the actions above.

 

 

(c) Nothing in this Section 6.02 is intended to give Buyer or any of its Affiliates, directly or indirectly, the right to control or direct the operations of the Business prior to the Closing, and prior to the Closing, Sellers shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over their respective Businesses.

 

(d) Except as (i) set forth in Schedule 6.02(d), (ii) required by applicable Law (including any COVID-19 Measures), (iii) consented to in writing by Sellers (which consent shall not unreasonably be withheld, delayed or conditioned), or (iv) otherwise contemplated or required by the terms of this Agreement, from the date of the Original Agreement until the earlier of the termination of this Agreement and the Closing, or (v) for actions taken during any period of full or partial suspension of operations related to the COVID-19 pandemic that are reasonably necessary to (A) protect the health and safety of the employees of Buyer’s business or other business counterparties of Buyer, or (B) respond to third-party supply or service disruptions caused by the COVID-19 pandemic, from the date of the Original Agreement until the earlier of the termination of this Agreement and the Closing, Buyer shall: (a) operate its business in all material respects in the Ordinary Course of Business; (b)  use commercially reasonable efforts to maintain and preserve its business organization and properties and assets in all material respects; and (c) preserve and maintain all material Permits required for the conduct of Buyer’s business as currently conducted.

 

(e) From the date of the Original Agreement to the earlier of the termination of this Agreement and the Closing, except as (i) set forth in Schedule 6.02(e), (ii) required by applicable Law (including any COVID-19 Measures), (iii) consented to in writing by Sellers (which consent shall not unreasonably be withheld, delayed or conditioned), or (iv) otherwise contemplated or required by the terms of this Agreement, including the PIPE Equity Offering, Buyer shall not, and shall not permit its Subsidiaries to, do any of the following:

 

(i) amend, modify or otherwise change its organizational documents in a manner that would reasonably be expected to prevent, impede or materially delay the transactions contemplated by this Agreement or otherwise in a manner materially adverse to Sellers;

 

(ii) split, combine, reclassify, subdivide, exchange, recapitalize or enter into any similar transaction in respect of any share capital, declare, repurchase any equity, authorize, set aside, make or pay any special or extraordinary dividend or other distribution (whether in cash, shares or property or any combination thereof) in respect of any share capital, or make any other actual, constructive or deemed distribution in respect of the share capital;

 

(iii) issue any equity interests or convertible or exchangeable securities, other than (A) pursuant to the PIPE Equity Offering, (B) the conversion or exercise of existing debentures and warrants, (C) the issuance of shares of Common Stock upon the exercise of any equity award that is outstanding as of the date of the Original Agreement in accordance with its terms or is granted pursuant to Section (D) of this paragraph, and (D) the issuance of options, shares of restricted stock or other equity awards to then-current employees, directors or independent contractors of Buyer in the Ordinary Course of Business;

 

 

(iv) merge or consolidate with any Person or otherwise enter into a material joint venture with any Person or adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of Buyer;

 

(v) file any Tax Return in a manner that is materially inconsistent with past practice, settle any material tax claim or claimed deficiency, or enter into any Tax indemnity agreement or similar arrangement either with a related party or on a non-arm’s length basis, in each case, to the extent such action would have a material and adverse impact on the value of the Consideration Units; or

 

(vi) authorize or otherwise commit to take any of the actions above.

 

(f) Nothing in this Section 6.02 is intended to give Sellers or any of their respective Affiliates, directly or indirectly, the right to control or direct the business of Buyer or its Subsidiaries at any time prior to the Closing, and prior to the Closing, Buyer and its Subsidiaries shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over their respective businesses.

 

Section 6.03. Notifications; Disclosure.

 

(a) During the period from the date of the Original Agreement and prior to the earlier of the Closing or the termination of this Agreement in accordance with its terms, each Party hereto shall promptly notify the other Party in writing upon becoming aware of any fact, change, condition, circumstance or occurrence or nonoccurrence of any event that will or is reasonably likely to result in any of the conditions set forth in Article VII becoming incapable of being satisfied; provided, however, that the delivery of any notice pursuant to this Section 6.03 shall not limit or otherwise affect the remedies available hereunder to the Party receiving such notice.

 

(b) Sellers and Buyer may, prior to the Closing Date, deliver to Buyer or Sellers, as applicable, modifications, changes or updates to the Seller Disclosure Schedules or the Buyer Disclosure Schedules, as applicable, in order to disclose or take into account facts, matters or circumstances which arise or occur between the date of the Original Agreement and the Closing Date permitted by Section 6.02 to the extent that if such facts, matters or circumstances had occurred prior to the date of the Original Agreement, would have been required to be set forth or described in the Seller Disclosure Schedule or the Buyer Disclosure Schedule, as applicable. For the avoidance of doubt, no updated information provided or notified to Buyer or Sellers, as applicable, in accordance with this Section 6.03(b) shall be deemed to cure any breach of warranty or covenant made in this Agreement or otherwise relieve Sellers or Buyer, as applicable, of any liability under Article VIII.

 

 

Section 6.04. Access to Information. From the date of the Original Agreement until the Closing, upon reasonable notice, Sellers shall and shall cause their respective officers, directors, employees, agents, representatives, accountants and counsel to (i) afford Buyer and its authorized representatives reasonable access to the offices, properties and books and records of the Business, and (ii) furnish to the officers, employees, and authorized agents and representatives of Buyer such additional financial and operating data and other information regarding the Business (or copies thereof) as Buyer may from time to time reasonably request, in each case, solely for purposes of Buyer’s integration planning; provided, however, that any such access or furnishing of information shall be conducted at Buyer’s expense, during normal business hours, under the supervision of Sellers’ personnel, in such a manner as not to interfere with the normal operations of the Business and may be limited to the extent such access, in light of COVID-19 or COVID-19 Measures, would jeopardize the health and safety of any of their respective employees or other Representatives. No investigation by Buyer or other information received by Buyer shall operate as a waiver or otherwise affect any representation, warranty or agreement given or made by Sellers in this Agreement. Notwithstanding anything to the contrary in this Agreement, Sellers shall not be required to disclose any information to Buyer if such disclosure would, in Sellers’ sole discretion, (i) cause significant competitive harm to the Business if the transactions contemplated hereby are not consummated, (ii) jeopardize any attorney-client or other legal privilege or (iii) contravene any applicable Laws, fiduciary duty or binding agreement entered into prior to the date of the Original Agreement. Notwithstanding the foregoing, (A) Buyer shall not have access to (x) personnel records of the Transferred Employees relating to individual performance or evaluation records, medical histories or other information that in Sellers’ opinion (in their sole discretion) is sensitive or the disclosure of which could subject Sellers to risk of liability, (y) any real property owned or leased by Sellers for purposes of conducting any invasive or intrusive environmental sampling or testing or (z) any information to the extent relating to any Excluded Asset, Excluded Liability or any Tax Return of Sellers or their Affiliates that do not relate to the Business and (B) Sellers shall have the right to withhold any information relating to the sale process of the Business and information and analysis relating thereto. Buyer shall hold in confidence all information so obtained in accordance with the Confidentiality Agreement. In connection with Buyer, its Affiliates and their respective Representatives carrying out the activities contemplated under this Section 6.04, Buyer shall exercise reasonable care, and shall cause its Affiliates and their respective Representatives to use reasonable care, and to not cause any damage to the properties, assets or offices of Sellers.

 

Section 6.05. Taxes.

 

(a) In connection with the preparation of any Tax Returns or for any inquiry, audit or investigation by any Tax authority or any administrative or judicial proceeding, the Parties shall reasonably cooperate with each other in a timely manner, providing all records, information and work papers reasonably requested by any other Party, and providing access to employees as reasonably requested. The Parties further agree, upon request, to use their commercially reasonable efforts to (i) obtain any certificate or other document from any Governmental Authority or any other Person or (ii) issue any truthful Tax certificate or document to each other, in each case, to mitigate, reduce or eliminate any Tax that could be imposed on any Party (including with respect to the transactions contemplated under this Agreement); provided, that such action does not result in any incremental liability for the Party that is obtaining or issuing such certificate or document or otherwise prejudice the legal or commercial position of such Party or its direct or indirect owners. Any Party that intends to withhold any amount in respect of Taxes from amounts payable to the other Party in connection with the transactions contemplated by this Agreement shall provide at least ten (10) days prior written notice of such withholding (and such notice shall provide the applicable legal requirement giving rise to such withholding).

 

 

(b) In the case of any taxable period that begins on or before the Closing Date and ends thereafter (each a “Straddle Period”), any real property, personal property, improvement, assessment, special assessment, ad valorem and similar Taxes with respect to the Transferred Assets (such Taxes, “Covered Taxes”) for such Straddle Period shall be allocated (i) to the portion of such Straddle Period ending on the Closing Date in an amount equal to the total amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days in the portion of the Straddle Period ending on (and including) the Closing Date and the denominator of which is the number of days in the entire Straddle Period, and shall be an Excluded Liability, and (ii) to the portion of such Straddle Period beginning after the Closing Date in an amount equal to the total amount of such Taxes for the entire Straddle Period multiplied by a fraction, the numerator of which is the number of days in the portion of the Straddle Period after the Closing Date and the denominator of which is the number of days in the entire Straddle Period, and shall be an Assumed Liability; provided, that, the amount of such Covered Taxes for which Sellers are responsible under the terms of this Agreement shall not be increased by any actions taken by Buyer (or its Affiliates) or other events occurring after the Closing. Sellers shall be liable and responsible for the proportionate amount of such Covered Taxes that is attributable to the portion of any Straddle Period ending on the Closing Date, and Buyer shall be liable and responsible for the proportionate amount of such Covered Taxes that is attributable to the portion of any Straddle Period beginning after the Closing Date. For purposes of this Agreement, any Taxes that are not Covered Taxes shall be allocated between the Pre-Closing Tax Period and the Post-Closing Tax Period on a ‘closing of the books’ basis. Upon receipt of any bill for any Covered Taxes, Buyer or Sellers, as applicable, shall present a statement to the other setting forth the amount of reimbursement to which each is entitled under this Section 6.05 (taking into account the amounts of Covered Taxes, if any, that Buyer or Sellers remitted to a Governmental Authority for any taxable period (or portion thereof) for which the other is responsible pursuant to this Section 6.05), together with such supporting evidence as is reasonably necessary to calculate the proration and reimbursement amount. The proration amount shall be paid by the Party owing it to the other within ten (10) days after delivery of such statement. The Party that has the primary obligation to do so under applicable Law shall file any Tax Return that is required to be filed in respect of Taxes described in this Section 6.05. The Parties will cooperate and act in good faith to minimize the amount of Covered Taxes.

 

(c) All Transfer Taxes imposed by any taxing jurisdiction shall be borne and timely paid fifty percent (50%) by Buyer and fifty percent (50%) by the relevant Seller. Buyer and such Seller shall each, at its own expense, timely file any Tax Return or other document required to be filed by it with respect to such Transfer Taxes, and Buyer and Sellers shall cooperate in the preparation and filing of any Tax Returns that must be filed in connection with any Transfer Taxes and in ensuring that any applicable Transfer Taxes are borne consistent with the terms of this Section 6.05(c) (including by making timely reimbursement or indemnification payments between applicable parties). Each Party shall use commercially reasonable efforts to cooperate upon request as reasonably necessary to minimize the amount of any Transfer Taxes or fees applicable to the transactions contemplated by this Agreement.

 

(d) Buyer and Sellers agree that for the taxable year that includes the Closing Date, they will follow the Standard Procedure of Rev. Proc. 2004-53, 2004-34 IRB 320, so that each of Buyer and Sellers shall be responsible for employment tax reporting with respect to the wages and other compensation that it pays to Transferred Employees for such calendar year.

 

 

(e) Any Tax Return required to be filed by the Purchased Subsidiary after the Closing Date that pertains to any Pre-Closing Tax Period or any Tax for which any Seller could be responsible shall be prepared in a manner consistent with the past practices of the Purchased Subsidiary or applicable Seller, except as otherwise required by Law. Any such Tax Return required to be filed by the Purchased Subsidiary shall be prepared by Buyer, at its own expense, and shall be provided to Sellers for their review and approval (not to be unreasonably withheld, conditioned or delayed) at least twenty (20) days prior to the due date for such Tax Return (or, if such deadline is not reasonably practicable given the applicable due date, as soon as reasonably practicable). Parent shall control the filing of any income Tax Return that is filed by or on behalf of any Seller (Buyer will have no rights to review or otherwise receive or exert control over any such Tax Return).

 

(f) With respect to any Tax audit, examination, or other proceeding with respect to the Purchased Subsidiary or that could give rise to any Tax liability for which any Seller would be responsible under the terms of this Agreement (any such proceeding, a “Tax Matter”), Sellers shall be entitled to control the conduct of such Tax Matter to the extent that it is reasonably expected that Sellers would be required to bear greater than fifty percent (50%) of all Losses associated therewith. Buyer shall give Sellers notice of any Tax Matter promptly after becoming aware of the Tax Matter. Sellers shall keep Buyer reasonably informed regarding any Tax Matter that Sellers control, Buyer shall be entitled to participate in any such Tax Matter at its own expense, and Sellers shall not settle or otherwise resolve any such Tax Matter that could reasonably be expected to have an adverse effect on Buyer without Buyer’s prior written consent (not to be unreasonably withheld, conditioned or delayed). Buyer shall be entitled to control any Tax Matter that could reasonably be expected to result in a liability for which Buyer would be responsible that Sellers do not control under this Section 6.05(f), provided that Buyer shall keep Sellers reasonably informed regarding any Tax Matter that Buyer controls, Sellers shall be entitled to participate in any such Tax Matter at Sellers’ own expense, and Buyer shall not settle or resolve any Tax Matter without Sellers’ prior written consent (not to be unreasonably withheld, conditioned or delayed). Sellers shall be entitled to control any income Tax audit, examination or other proceeding pertaining to any Tax Return that is filed by or on behalf of any Seller (or any of Sellers’ Affiliates other than the Purchased Subsidiary) (and Buyer will have no rights to review or otherwise participate in or exert control over any such proceedings).

 

(g) Any Tax refund (including for this purpose any credit against Tax otherwise due) of the Purchased Subsidiary that pertains to a Pre-Closing Tax Period shall be for the benefit of Sellers. Within ten (10) days following receipt of any such refund by Buyer or any of its Affiliates, Buyer shall give Sellers notice of such refund and pay the amount of such refund to an account designated by Sellers. Buyer shall use commercially reasonable efforts and take any actions reasonably requested by Sellers to obtain amounts payable to Sellers pursuant to this Section 6.05.

 

Section 6.06. Confidentiality.

 

(a) The Parties agree that the Confidentiality Agreement shall terminate upon the Closing (other than with respect to any non-public information relating to the Business).

 

 

(b) Subject to Section 6.10, following the Closing Date, Sellers and their respective Affiliates will hold confidential all information related to the Business, the Transferred Assets and the Assumed Liabilities in their possession prior to the Closing Date and not disclose such information to any third party (other than to each other and their respective Representatives), without the prior written consent of Buyer, for a period of two (2) years following the Closing Date; provided, however, the foregoing shall not apply to (i) any use or disclosure of such information by Sellers or their respective Affiliates (A) in connection with any services under the Transaction Services Agreement, License Agreements or other agreements between Sellers or their Affiliates and Buyer or its Affiliates requiring the use or disclosure of such information, (B) required by any applicable Law, any stock exchange requirements (based upon the reasonable advice of counsel) and in connection with claims (including the defense of claims) and the enforcement of any right or remedy, in each case, relating to this Agreement or the Ancillary Agreements or the transactions contemplated hereby and thereby, or (ii) any information (A) pertaining to the Excluded Assets, the Excluded Liabilities or the Retained Business, (B) generally available to, or known by, the public (other than as a result of disclosure in violation of this Section 6.06(b)), (C) that Sellers can establish was independently developed by Sellers (other than by the Business prior to the Closing) without use of any confidential information with respect to the Business, or (D) was made available to Sellers by a third party with the right to disclose such information.

 

(c) Subject to Section 6.10, following the Closing Date, Buyer and its Affiliates (including, after the Closing, the Purchased Subsidiary) will hold confidential all information related to the Excluded Assets, the Excluded Liabilities and the Remaining Business and not disclose such information to any third party (other than to each other and their respective Representatives), without the prior written consent of Sellers, for a period of two (2) years following the Closing Date; provided, however, the foregoing shall not apply to (i) any use or disclosure of such information by Buyer or its Affiliates (A) in connection with any services under the Transaction Services Agreement, License Agreements or other agreements between Buyer or its Affiliates and Sellers or their Affiliates requiring the use or disclosure of such information, (B) required by any applicable Law, any stock exchange requirements (based upon the reasonable advice of counsel) and in connection with claims (including the defense of claims) and the enforcement of any right or remedy, in each case, relating to this Agreement or the Ancillary Agreements or the transactions contemplated hereby and thereby, or (ii) any information (A) pertaining to the Transferred Assets or the Business, (B) generally available to, or known by, the public (other than as a result of disclosure in violation of this Section 6.06(c)), (C) that Buyer can establish was independently developed by Buyer without use of any confidential information with respect to the Excluded Assets, the Excluded Liabilities or the Remaining Business, or (D) was made available to Buyer by a third party with the right to disclose such information.

 

Section 6.07. Non-Competition; Non-Solicitation.

 

(a) For a period of three (3) years commencing on the Closing Date (the “Restricted Period”), Parent shall not, and shall not permit any of its Subsidiaries to, directly or indirectly (other than through Buyer or its Subsidiaries), (i) engage in the Restricted Business in the Territory; or (ii) have an interest in any Person that engages directly or indirectly in the Restricted Business in the Territory; provided, that Parent and its Subsidiaries may (A) own or acquire, directly or indirectly, solely as an investment, securities, equity interests or indebtedness of any Person engaged in the Restricted Business traded on any national securities exchange if Parent is not a controlling Person of, or a member of a group which controls, such Person and does not, directly or indirectly, own 10% or more of any outstanding securities, equity interests or indebtedness of such Person, or (B) acquire any business or Person engaged in any Restricted Business if such Restricted Business accounted for less than 15% of such business’ or Person’s consolidated annual revenues during the fiscal year prior to such acquisition being made (or, if earlier, the entry in to the definitive agreement providing for the making of such acquisition).

 

 

(b) During the Restricted Period, Parent shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, hire for employment or engagement any Transferred Employee; provided that the foregoing restriction shall not apply to (i) a general solicitation which is not directed specifically to any such employees and hiring as a result thereof, (ii) any employee whose employment has been terminated by Buyer or its Subsidiaries (including after the Closing, the Purchased Subsidiary), or (iii) after three (3) months from the date of termination of employment, any employee whose employment has been terminated by the employee.

 

(c) During the Restricted Period, Buyer shall not, and shall not permit any of its Subsidiaries (including after the Closing, the Purchased Subsidiary) to, directly or indirectly, hire for employment or engagement any Person who was an employee of Parent or its Subsidiaries as of immediately prior to the Closing (other than the Transferred Employees); provided that the foregoing restriction shall not apply to (i) a general solicitation which is not directed specifically to any such employees, (ii) any employee whose employment has been terminated by Parent or its Subsidiaries, or (iii) after three (3) months from the date of termination of employment, any employee whose employment has been terminated by the employee (without any encouragement from Buyer or its Subsidiaries).

 

(d) Each Party acknowledges that the restrictions contained in this Section 6.07 are reasonable and necessary to protect the legitimate interests of the Parties and constitute a material inducement to each Party to enter into this Agreement and consummate the transactions contemplated by this Agreement. In the event that any covenant contained in this Section 6.07 should ever be adjudicated to exceed the time, geographic, product or service or other limitations permitted by applicable Law in any jurisdiction, then any court is expressly empowered to reform such covenant, and such covenant shall be deemed reformed, in such jurisdiction to the maximum time, geographic, product or service or other limitations permitted by applicable Law. The covenants contained in this Section 6.07 and each provision hereof are severable and distinct covenants and provisions. The invalidity or unenforceability of any such covenant or provision as written shall not invalidate or render unenforceable the remaining covenants or provisions hereof, and any such invalidity or unenforceability in any jurisdiction shall not invalidate or render unenforceable such covenant or provision in any other jurisdiction.

 

Section 6.08. Exclusivity.

 

(a) Sellers agree that, unless this Agreement is terminated by its terms, no Seller shall (and each Seller shall not cause or permit any of its Affiliates, agents or other Representatives or any other Person acting on their behalf to), directly or indirectly, through any officer, director, shareholder, partner, member, manager, Affiliate, employee, agent, investment banker, attorney, accountant or other representative or otherwise, (i) solicit, initiate or knowingly encourage the submission of any proposal or offer (an “Acquisition Proposal”) from any Person (including any of its officers, directors, partners, shareholders, members, managers, Affiliates, employees, agents and other representatives) relating to purchase of any of the Purchased Interests or any merger or consolidation, or acquisition or purchase of all or any portion of the ownership interests of, or any material asset of, or all or substantially all of the assets of, the Business, the Purchased Subsidiary and/or the Transferred Assets other than the sale or disposition of immaterial assets in the Ordinary Course of Business, or (ii) participate in any discussions or negotiations regarding, or furnish to any other Person any non-public information with respect to, or otherwise cooperate in any way with, or enter into any agreement or understanding with any Person, or assist or participate in, facilitate or knowingly encourage any effort or attempt by any other Person to do or seek to do any of the foregoing.

 

 

(b) Sellers shall (and shall cause their respective officers, directors, Affiliates, employees, agents, investment bankers, attorneys, accountants or other Representatives to) immediately cease and cause to be terminated all contacts, discussions and negotiations with third parties (other than Buyer and its Affiliates, agents and Representatives) regarding any Acquisition Proposal.

 

Section 6.09. Litigation Support and Cooperation. If and for so long as any Party is actively contesting or defending against any Claim arising in connection with (a) the transactions contemplated under this Agreement or (b) any fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incident, action, failure to act or transaction on or prior to the Closing Date involving the Business, the Purchased Subsidiary or the Transferred Assets (other than an action brought by one Party against another Party or Parties under the terms of this Agreement or in connection with the transactions contemplated hereby), each of the Parties will cooperate with the contesting or defending Party and its counsel in the contest or defense, make available its personnel, and provide such testimony and access to its books and records relating solely to the Business, the Purchased Subsidiary or the Transferred Assets (to the extent in its possession) as shall be reasonably necessary in connection with the contest or defense, all at the sole cost and expense of the contesting or defending Party (unless the contesting or defending Party is entitled to indemnification therefor under Article VIII); provided, however, that such access shall not unreasonably interfere with Buyer’s or its Affiliates’, or Sellers or their respective Affiliates’, as the case may be, respective businesses; and provided, further that a Party may restrict the foregoing access to the extent that (i) such restriction is required by applicable Law, including COVID, (ii) such access or provision of information would reasonably be expected to result in a violation of confidentiality obligations to a third party, (iii) disclosure of any such information would result in the loss or waiver of the attorney-client privilege, or (iv) such access, in light of COVID-19 or COVID-19 Measures, would jeopardize the health and safety of any of their respective employees or other Representatives.

 

Section 6.10. Public Announcements. Unless otherwise required by applicable Law, compliance with the SEC or stock exchange requirements (based upon the reasonable advice of counsel), no Party to this Agreement shall make any public announcements in respect of this Agreement or the transactions contemplated hereby or otherwise communicate with any news media without the prior written consent of the other Party (which consent shall not be unreasonably withheld or delayed), and the Parties shall cooperate as to the timing and contents of any such announcement and shall consider in good faith the comments of the other Party.

 

 

Section 6.11. Post-Signing Contracts. From time to time prior to the Closing, Sellers may add additional Critical IP Licenses to the list of Post-Signing Contracts by delivering written notice with respect thereto to the Buyer. Following Buyer’s receipt (whether direct or through the virtual dataroom) of complete and correct copies of each Post-Signing Contract (including all modifications, amendments and supplements thereto and waivers thereunder), Buyer shall review such Post-Signing Contracts and shall inform Sellers in writing of any objections to the Post-Signing Contracts prior to Closing (each, a “Contract Objection”). Sellers shall designate each such Post-Signing Contract as either a Transferred Contract or a Shared Contract when such Post-Signing Contract is delivered to Buyer. Buyer and Sellers shall cooperate in good faith to resolve any Contract Objections as promptly as possible. If the Parties are unable to resolve a Contract Objection, Buyer shall have the right to remove any Post-Signing Contract that is the subject of such unresolved Contract Objection as a Transferred Contract or a Shared Contract, as applicable, and such Post-Signing Contract shall be an Excluded Asset (each, an “Excluded Post-Signing Contract”). Buyer shall have no responsibility or liability for any Excluded Post-Signing Contract. Buyer shall deliver to Sellers a list of all Excluded Post-Signing Contracts as soon as practicable prior to Closing.

 

Section 6.12. Approvals and Consents.

 

(a) Notwithstanding anything in this Agreement to the contrary, this Agreement shall not constitute an agreement to assign, directly or indirectly, any asset (including any Contract), claim or right, or any benefit arising under or resulting from such asset, claim or right, if an attempted direct or indirect assignment thereof, without the consent or waiver of a Third Party (each, a “Consent”), would constitute a breach or other contravention of the rights of such Third Party, would be ineffective with respect to any party to a Contract concerning such asset, claim or right or would in any way adversely affect the rights of Sellers or their respective Affiliates or, upon transfer, Buyer under such asset, claim or right. If any direct or indirect transfer or assignment by Sellers or their respective Affiliates to, or any direct or indirect assumption by Buyer of, any interest in, or liability, obligation or commitment under, any asset, claim or right requires a Consent, then such transfer, assignment or assumption shall be made subject to such Consent being obtained; provided that to the extent such Consent is not able to be obtained in accordance with the provisions of this Section 6.12, the provisions of Section 6.12(c) shall apply to such asset, claim or right.

 

(b) Following the date of the Original Agreement until the Closing Date, the Parties shall cooperate with each other and use their respective commercially reasonable efforts, subject to and without limiting anything contained in this Agreement, to obtain all material Consents, including those set forth on Schedule 6.12(b). Neither Sellers nor any of their respective Affiliates shall have any obligation to (i) pay any consideration to any Person for the purpose of obtaining any Consent, or (ii) pay any costs or expenses of any Person in connection with obtaining any Consent, unless all of such costs and expenses (if any) will be borne exclusively by Buyer. Nothing in this provision shall affect any obligation in any Ancillary Agreement to the extent expressly provided therein. Without limiting the foregoing, Buyer shall provide each Seller (or their applicable Affiliates) such information and references (including regarding its creditworthiness) as may reasonably and timely be requested by any relevant Third Party for the purposes of obtaining the required Consents and shall enter into such undertakings or procure such guarantees in favor of any relevant Third Party as may be reasonably requested by such relevant Third Party for the purposes of obtaining the required Consents. The provisions of this Section 6.12 shall not apply with respect to the Shared Contracts, with respect to which Section 6.13 shall apply.

 

 

(c) Notwithstanding anything to the contrary in this Agreement or any Ancillary Agreement, neither this Agreement nor any Ancillary Agreement shall constitute an agreement to sell, assign, transfer, convey, deliver or assume any asset that would constitute a Transferred Asset if such asset is not transferable in accordance with applicable Law or with any requisite Consent. If the transfer or assignment of any asset intended to be transferred or assigned hereunder is not consummated prior to or on the Closing Date, whether as a result of a prohibition on transfer due to a violation or breach of applicable Law or any other requisite Consent, then Sellers shall thereafter hold such asset (a “Non Assignable Asset”) for the use and benefit, insofar as legally permitted and reasonably possible, of Buyer until the consummation of the transfer or assignment thereof, but in no event longer than twelve (12) months after the Closing Date (or as otherwise mutually determined by the Parties). In addition, for the period beginning on the Closing Date and not to exceed twelve (12) months after the Closing Date, to the extent permitted by Law, Sellers shall use their commercially reasonable efforts to take such other actions as may reasonably be requested by Buyer in order to place Buyer, insofar as legally permitted and reasonably possible, in the same position as if such Non Assignable Asset had been transferred as contemplated hereby and so that all the benefits and burdens relating to such Non Assignable Asset, including possession, use, risk of loss, potential for gain, and dominion, control and command over such asset, are to inure from and after the Closing Date to Buyer. After the Closing, Buyer shall indemnify and hold harmless Sellers and their Affiliates, Representatives, successors and assigns from and against any and all Liabilities based upon, arising out of or relating to the performance of, or failure to perform, any obligations under the Non Assignable Assets that are at the direction of or for the benefit of Buyer. To the extent that any Non Assignable Asset contains an “evergreen” provision that automatically renews such Non Assignable Asset unless terminated or cancelled by either party thereto, Sellers shall not be prohibited from terminating or canceling such Non Assignable Asset as permitted pursuant to the terms thereof with the prior written consent of Buyer (not to be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing, any such Non Assignable Asset shall still be considered a Transferred Asset. Sellers shall not be obligated, in connection with the foregoing, to expend any money or personnel in connection with the maintenance of the Non Assignable Asset unless the necessary funds or expenses or costs associated with such maintenance are advanced by Buyer, other than reasonable out-of-pocket expenses, attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by Buyer; provided, however, that Sellers shall, as promptly as practicable, provide notice to Buyer of the amount of all such expenses and fees.

 

(d) Following the date of the Original Agreement, the Parties shall cooperate with each other and use their respective commercially reasonable efforts, subject to and without limiting anything contained in this Agreement, to obtain all material approvals or consents from, or to provide or make any material notice or registration filing with (each a “Regulatory Filing”), any Governmental Authority, including any Regulatory Filing required by a Governmental Authority to be made before the Closing Date. Neither Sellers nor any of their respective Affiliates shall have any obligation to pay any costs or expenses in connection with making a Regulatory Filing, unless all of such costs and expenses (if any) will be borne exclusively by Buyer.

 

 

Section 6.13. Shared Contracts.

 

(a) Except as otherwise agreed by Sellers and Buyer or as otherwise expressly provided in this Agreement or the Ancillary Agreements (including with respect to any Contract identified by Buyer and Sellers as reasonably necessary for Buyer to continue operation of the Business upon termination of any service provided under the Transition Services Agreement), until the expiration or termination date of the applicable Shared Contract (assuming, for these purposes, that the then-current term in effect as of immediately prior to the Closing is not renewed or extended), the Parties shall (and shall cause their Affiliates to) use commercially reasonable efforts to obtain or structure an arrangement for Buyer to receive the rights and benefits, and bear the obligations and burdens, of the portion of such Shared Contract that relates to and is allocated to the Business, as reasonably agreed by the Parties, and is reasonably necessary for Buyer to continue operation of the Business upon termination of any service provided under the Transition Services Agreement, in each case, as reasonably agreed by the Parties; provided, that Sellers and their respective Affiliates shall not be required to take any action that would, in the good-faith judgment of Sellers, constitute a breach or other contravention of the rights of any Person(s), be ineffective under, or contravene, applicable Law or any such Shared Contract or adversely affect the contractual rights of Sellers or any of their respective Affiliates. Buyer shall indemnify and hold harmless Sellers and their respective Affiliates for and against all Liabilities (including Tax Liabilities) arising out of or relating to each such arrangement. With respect to any Liability pursuant to, under or relating to any Shared Contract, such Liability shall be allocated between the applicable Seller, on the one hand, and Buyer, on the other hand, as follows: (i) if a Liability is incurred solely in respect of the Business or the other businesses of such Seller, such Liability shall be allocated to Buyer (to the extent it would otherwise constitute an Assumed Liability) or such Seller (to the extent it would otherwise constitute an Excluded Liability), and (ii) if a Liability cannot be so allocated under clause (i), such Liability shall be allocated to such applicable Seller or Buyer, as the case may be, based on the relative proportion of total benefit received by the Business (taking into account the extent to which such Liability would otherwise constitute an Assumed Liability or an Excluded Liability hereunder) and the other businesses of such Seller under the relevant Shared Contract, as reasonably determined by the Parties consistent with this Agreement. Notwithstanding the foregoing, each of Sellers and Buyer shall be responsible for any or all Liabilities arising from its (or its Affiliates’) direct or indirect breach of any Shared Contract; provided, that neither Party shall be responsible for any Liabilities that arise from taking any action at the request of the other Party even if such action constitutes a direct or indirect breach of any Shared Contract.

 

(b) Nothing in this Section 6.13 shall be construed so as to require any of the Parties or their respective Affiliates to pay money to any Third Party, commence any litigation or offer or grant any accommodation (financial or otherwise) to any Third Party in connection with the separation or transfer of, or otherwise in respect of, any Shared Contract. For the avoidance of doubt, neither Sellers nor Buyer shall be required to provide credit support for the other Party in respect of such other Party’s portion of a Shared Contract.

 

Section 6.14. Transition Services Agreement. Prior to the Closing Date, Buyer and Sellers shall discuss and negotiate in good faith such updates and modifications to the Annexes to the Transition Services Agreement as may be mutually agreed by the Parties.

 

 

Section 6.15. PIPE Equity Offering.

 

(a) Following the Closing, each Seller acknowledges that Buyer shall continue its offering of Units (the “PIPE Equity Offering”). Buyer shall consult with Sellers and keep Sellers reasonably apprised of the status of the PIPE Equity Offering. Buyer shall provide Sellers with a reasonable opportunity to review and comment on any forms, documents and reports in connection with the PIPE Equity Offering to be filed with the SEC, as applicable, and consider in good faith all comments reasonably proposed by Sellers. Buyer shall use, and shall cause its Affiliates to use, its and their commercially reasonable efforts to complete the PIPE Equity Offering as soon as possible, and Sellers shall provide, and shall cause their respective controlled Affiliates and Representatives to provide, to Buyer and its Representatives reasonable assistance and cooperation as is reasonably requested by Buyer in connection with the PIPE Equity Offering, including assisting Buyer with preparation of customary documents and other materials reasonably necessary in connection with the PIPE Equity Offering.

 

(b) Buyer acknowledges that Parent will be eligible to redeem up to $5,000,000 in the aggregate of the Consideration Units pursuant to the terms of the Investor Rights Agreement.

 

(c) Notwithstanding the foregoing, Buyer shall indemnify and hold harmless Parent, Sellers and their respective Affiliates and their respective Representatives from and against any and all Liabilities, Losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred in connection with the arrangement of the PIPE Equity Offering or any assistance or activities provided in connection therewith.

 

(d) Buyer shall not amend, terminate the NCP Subscription Agreement, or waive any provision thereof without Parent’s prior written consent pursuant to the terms of the NCP Subscription Agreement.

 

Section 6.16. Audit of Business. Sellers shall, or shall cause its Affiliates to, engage UHY LLP to (a) conduct an audit of the balance sheets of the Business as of December 31, 2018 and 2019, and the related statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements, (b) perform reviews of the Business’s unaudited financial information for the six (6) months ended June 30, 2020 and 2019, and (c) review the income tax provisions and related footnote disclosures in connection with the audits and quarterly reviews of the financial statements referenced in clauses (a) and (b) (collectively, the “Business Audit”) and shall use commercially reasonable efforts to have such Business Audit completed by the Closing; provided, that Buyer shall be responsible for all fees and expenses payable to UHY LLP by Sellers or their respective Affiliates (whether or not the Closing shall have occurred). Sellers shall keep Buyer reasonably informed of the status of the Business Audit, and Buyer shall provide reasonable assistance and cooperate with Sellers in connection with the Business Audit.

 

Section 6.17. Receivables. From and after the Closing, if Sellers or any of their Affiliates receives or collects any funds relating to any accounts receivable of the Business or any other Transferred Asset, Sellers or any of their Affiliate shall remit such funds to Buyer within ten (10) Business Days after its receipt thereof. From and after the Closing, if Buyer or its Affiliate receives or collects any funds relating to any Excluded Asset, Buyer or its Affiliate shall remit any such funds to Sellers within ten (10) Business Days after its receipt thereof.

 

 

Section 6.18. Transfer of Domain Names. Within thirty (30) days following the Closing Date, Sellers shall, for no additional consideration, execute documents, papers, forms, and authorizations, and take such other actions as are reasonably necessary to effectuate the transfer of exclusive control of the Domain Names to Buyer, and enable Buyer to register the Domain Names in the name of Buyer (or Buyer’s designee) with Buyer’s preferred domain name registry or as Buyer may otherwise designate, including unlocking the Domain Names and providing the transfer authorization codes to Buyer, and complying with all reasonable registrar transfer requirements. Following the Closing, Sellers irrevocably consent and authorize the registrars of the Domain Names to transfer them to Buyer.

 

Section 6.19. Cooperation Regarding Onboarding. Subject to applicable Law, between the date of the Original Agreement and the earlier of the Closing Date and the termination of this Agreement, Sellers shall use commercially reasonable efforts to cooperate with and make appropriate employees, consultants and contractors reasonably available to Buyer to assist Buyer, at Buyer’s expense in respect of actual out-of-pocket onboarding costs, to plan and implement necessary and appropriate policies, procedures and other arrangements in connection with the transition of ownership of the Business; provided, that such access may be limited to the extent, in light of COVID-19 or COVID-19 Measures, such access would jeopardize the health and safety of any of their respective employees or other Representatives.

 

Section 6.20. Further Assurances. Following the Closing, each of the Parties shall, and shall cause their respective Affiliates to, execute and deliver such additional documents, instruments, conveyances and assurances and take such further actions as may be reasonably required to carry out the provisions hereof and give effect to the transactions contemplated by this Agreement and the Ancillary Agreements. Sellers shall not be obligated to pay any consideration therefor to any Third Party from whom consent or approval is requested.

 

Section 6.21. Stock Exchange Listing. Buyer shall use its commercially reasonable efforts to cause the shares of Common Stock issuable upon the conversion of the Debentures issuable to Parent hereunder and upon the exercise of the Warrants issuable to Parent hereunder to be approved for listing on the Nasdaq, subject to official notice of issuance, as promptly as practicable after the Closing.

 

Section 6.22. Proxy Statement.

 

(a) As soon as reasonably practicable following the Closing, Buyer shall prepare (with Sellers’ reasonable cooperation) a proxy statement to be made available to the stockholders of Buyer relating to the Buyer Stockholder Meeting (together with any amendments or supplements thereto, the “Proxy Statement”) and cause it to be furnished to the SEC and to be sent or otherwise made available to the stockholders of Buyer relating to the Buyer Stockholder Meeting in compliance with applicable Law, including the Exchange Act and the Securities Act, it being understood that Buyer shall use reasonable best efforts to file the Proxy Statement within thirty (30) days after the Closing and in any event shall file the Proxy Statement with the SEC no later than forty-five (45) days after the Closing. Buyer shall promptly notify Sellers upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the Proxy Statement and shall provide Sellers with copies of all correspondence between it and its Representatives, on the one hand, and the SEC, on the other hand, with respect to the Proxy Statement. Buyer shall use its commercially reasonable efforts to respond as soon as reasonably practicable to any comments from the SEC with respect to the Proxy Statement. Notwithstanding the foregoing, prior to the furnishing of the Proxy Statement (or any amendment or supplement thereto) to the SEC and making it available to the stockholders of Buyer or responding to any comments of the SEC with respect thereto, Buyer shall (A) provide Sellers with a reasonable opportunity to review and comment on such document or response (including the proposed final version of such document or response) and (B) consider in good faith all comments reasonably proposed by Sellers. Buyer shall also take any other action required to be taken under the Securities Act, the Exchange Act, the Nasdaq or any other applicable Law in connection with the transactions contemplated by this Agreement.

 

 

(b) Buyer, on the one hand, and Sellers, on the other hand, each covenant that none of the information supplied or to be supplied by Buyer or Sellers, as applicable, for inclusion or incorporation by reference in the Proxy Statement will, at the date it is first filed with the SEC or mailed or otherwise made available to the stockholders of Buyer or at the time of the Buyer Stockholder Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with applicable Law, including the requirements of the Exchange Act and the rules and regulations thereunder.

 

(c) If, at any time prior to the receipt of the Requisite Buyer Stockholder Approval, any information relating to Buyer or any of its Affiliates, should be discovered by Buyer which, in the reasonable judgment of Buyer, should be set forth in an amendment of, or a supplement to, the Proxy Statement, so that any of such documents would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, Buyer shall promptly notify Sellers, and Buyer and Sellers shall cooperate in the prompt filing with the SEC of any necessary amendment of, or supplement to, the Proxy Statement and, to the extent required by applicable Law, in disseminating the information contained in such amendment or supplement to the stockholders of Buyer.

 

Section 6.23. Buyer Stockholder Meeting.

 

(a) In accordance with applicable Law and its organizational documents, Buyer shall, as soon as practicable after the Proxy Statement is declared effective under the Securities Act, establish a record date for, duly call, give notice of, convene and hold a meeting of the stockholders of Buyer (together with any adjournment or postponement thereof, the “Buyer Stockholder Meeting”) for the purpose of seeking the Requisite Buyer Stockholder Approval, and shall submit such proposal to such holders entitled to vote at the Buyer Stockholder Meeting). The record date for the Buyer Stockholder Meeting shall be determined with prior consultation with Sellers. Notwithstanding anything to the contrary contained in this Agreement, Buyer shall not adjourn or postpone the Buyer Stockholder Meeting without Sellers’ prior written consent (such consent not to be unreasonably withheld, conditioned or delayed); provided, that without Sellers’ prior written consent, Buyer may adjourn or postpone the Buyer Stockholder Meeting (i) after consultation with Sellers, to the extent necessary to ensure that any supplement or amendment to the Proxy Statement is provided to the stockholders of Buyer within a reasonable amount of time in advance of the Buyer Stockholder Meeting or (ii) to a date that is in the aggregate not more than thirty (30) days following the originally scheduled date (or the date rescheduled pursuant to clause (i) hereof) if there are not sufficient affirmative votes in person or by proxy at such meeting to constitute a quorum at the Buyer Stockholder Meeting or to obtain the Requisite Buyer Stockholder Approval, in order to allow reasonable additional time for solicitation of proxies for purposes of obtaining a quorum or the Requisite Buyer Stockholder Approval.

 

 

(b) The Buyer Board(i) shall recommend that the stockholders of Buyer vote in favor of the authorization and approval of any of the matters subject to the Requisite Buyer Stockholder Approval, (ii) shall include the Buyer Board Recommendation in the Proxy Statement, and (iii) shall not withhold, withdraw, qualify or modify, or publicly announce its intent to withhold, withdraw, qualify or modify, in a manner adverse to Sellers, the Buyer Board Recommendation. For the avoidance of doubt, nothing in this Section 6.23(b) shall prohibit Buyer from disclosing to its stockholders any fact or circumstance that is required to be disclosed under applicable Law or that the Buyer determines, in good faith and after consultation with its outside legal counsel, is material to the stockholders of Buyer in making their decision in how to vote on the matters subject to the Requisite Buyer Stockholder Approval; provided that to the extent that Buyer reasonably determines that such disclosure could have substantially the same effect as a withdrawal, qualification or modification of the Buyer Board Recommendation in a manner adverse to Sellers, Buyer shall publicly reaffirm the Buyer Board Recommendation concurrently with making such disclosure.

 

Section 6.24. Post-Closing Access. From and after the Closing, for a period of six (6) years, Buyer shall, and shall cause its Affiliates (including the Purchased Subsidiary) to, (i) give Sellers and their Representatives reasonable access, during normal business hours and upon reasonable prior written notice and subject to applicable Laws relating to the exchange of information, to the business records of Buyer and its Affiliates, including the Purchased Subsidiary, relating to the Business, the Transferred Assets or operations of the Purchased Subsidiary on or before the Closing Date for any proper business purpose, and (ii) use commercially reasonable efforts to cause the employees of Buyer and its Affiliates (including the Purchased Subsidiary) to cooperate with Sellers and their Representatives, in each case, to the extent reasonably requested by Sellers in connection with accounting, Tax, SEC reporting and other similar needs to the extent relating to the Business on or before the Closing Date; provided, that such access may be limited to the extent Buyer reasonably determines, in light of COVID-19 or COVID-19 Measures, that such access would jeopardize the health and safety of any of its employees or other Representatives.

 

Section 6.25. Post-Closing Asset Transfers. In the event that at any time or from time to time after the Closing Date, Buyer or any of its Affiliates, including the Purchased Subsidiary, possesses any Excluded Asset or asset that does not primarily relate to the Business, Buyer shall promptly notify Sellers and shall transfer, or cause to be transferred, such Excluded Asset or asset to Sellers for no consideration. Prior to any such transfer, Buyer shall hold such asset in trust for the benefit of Sellers. In the event that at any time or from time to time after the Closing Date, Sellers or any of its Affiliates possess any asset which Sellers or their respective Affiliates owned on the Closing Date that was primarily used in connection with the Business which were not transferred to or otherwise held by Buyer pursuant to the terms of this Agreement, but would have otherwise been transferred as part of this Agreement but for that fact that such asset was not identified, discovered or located until after the Closing Date or inadvertently was not assigned, Sellers shall promptly notify Buyer and shall, or shall transfer, assign, or cause to be transferred or assigned, such property or asset to Buyer, for no additional consideration. Prior to any such transfer, Sellers shall hold such property or asset in trust for the benefit of Buyer.

 

 

Section 6.26. SEC Reports. From and after the date of the Original Agreement until the earlier of the Closing and the termination of this Agreement in accordance with its terms, Buyer shall, and shall cause its Subsidiaries to, use commercially reasonable efforts to (a) timely file or furnish all forms, documents and reports required to be filed or furnished by it with the SEC, (b) resolve any outstanding or unresolved comments in any comment letters from the staff of the SEC received by Buyer relating to any of its forms, documents or reports filed or furnished with the SEC, or any determination letter received from the Nasdaq, and (c) take all actions necessary to comply in all material respects with the requirements of the Securities Act, the Exchange Act and the Sarbanes-Oxley Act, as the case may be, and the applicable rules and regulations promulgated thereunder, and the applicable listing and corporate governance rules and regulations of the Nasdaq.

 

Section 6.27. Seller Marks. After the Closing, Buyer, for itself and its Affiliates, acknowledges and agrees that neither Buyer nor any of its Affiliates shall have any rights in any of the Seller Marks and neither Buyer nor any of its Affiliates shall contest the ownership or validity of any rights of Sellers or any of their Affiliates in or to the Seller Marks. In furtherance of the forgoing, as soon as practicable following the Closing Date, but no later than 180 days following such date, Buyer shall remove and change signage, change and substitute promotional or advertising material in whatever medium, change stationery and packaging and take all such other steps as may be required or appropriate to cease use of the Seller Marks; provided, however, notwithstanding anything to the contrary herein, Buyer shall not be in breach of this Section 6.27 by reason of (i) the appearance of the Seller Marks in or on any manuals, work sheets, operating procedures, other written or electronic data, materials or assets existing as of the Closing that are used for internal purposes only in connection with the Business, provided that Buyer endeavors to remove such appearances of the Seller Marks in the ordinary course of the operation of the Business; or (ii) the appearance of the Seller Marks in or on any third party’s publications, marketing materials, brochures, instruction sheets, equipment or products that Sellers distributed in the ordinary course of business or pursuant to a Contract prior to the Closing Date, and that generally are in the public domain, or any other similar uses by any such third party over which Buyer has no control, or (iii) the use by Buyer of the Seller Marks in a non-trademark manner for purposes of conveying to customers or the general public that the ownership of the Business has changed.

 

Section 6.28. Warranty Claims. With respect to the warranty obligations arising in respect of products sold or delivered or services performed by the Business prior to Closing (“Pre-Closing Warranty Claims”), Buyer shall satisfy any and all obligations related to Pre-Closing Warranty Claims, if any, pursuant to commercial customer contracts included in the Transferred Assets and in accordance with Sellers’ standard policies with respect to products and services warranty obligations, and Parent shall, or shall cause Sellers to, reimburse Buyer for the reasonable documented costs and expenses incurred by Buyer in satisfying such obligations to the extent such costs and expenses exceed $200,000; provided that, to the extent that the amounts reimbursed by or on behalf of Parent pursuant to this Section 6.28 exceed $200,000 in the aggregate, with respect to any costs and expenses relating to the Pre-Closing Warranty Claims in excess of $400,000 in the aggregate Parent shall, or shall cause Sellers to, reimburse Buyer for fifty percent (50%) of such reasonable documented costs and expenses.

 

 

Section 6.29. Mexico Subleased Property. From and after the date of this Agreement, the Parties shall cooperate to enter into a sublease with respect to the Mexico Subleased Property in form and substance reasonably acceptable to the Parties.

 

Section 6.30. Software Reseller Agreement. From and after the date of this Agreement, the Parties shall cooperate to enter into a software reseller agreement based on the terms set forth in Exhibit N hereto (the “Software Reseller Agreement”) in form and substance reasonably acceptable to the Parties.

 

ARTICLE VII

CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES

 

Section 7.01. Conditions to Each Party’s Obligation. The respective obligations of each Party to effect the transactions contemplated hereby are subject to the fulfillment or written waiver (to the extent permitted by Law) by Sellers and Buyer, at or prior to the Closing, of the following conditions:

 

(a) No Legal Prohibition. No statute, rule, regulation, order or other Law shall be enacted, promulgated, entered or enforced by any Governmental Authority of competent jurisdiction that would prohibit consummation by such Party of the transactions contemplated hereby.

 

(b) No Injunction. Such Party shall not be prohibited from consummating the transactions contemplated hereby by any Governmental Order of competent jurisdiction.

 

(c) PIPE Equity Offering. The “Initial Closing” under the NCP Subscription Agreement shall have been completed or shall be completed simultaneously with the Closing.

 

Section 7.02. Conditions to Obligation of Buyer. The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver (to the extent permitted by Law) by Buyer, at or prior to the Closing, of each of the following conditions:

 

(a) Representations and Warranties. (i) The representations and warranties of Sellers contained in Article IV of this Agreement (other than the Seller Fundamental Representations and Section 4.05(a)) shall be true and correct (without giving effect to any qualifications or limitations contained therein as to materiality or Material Adverse Effect) as of the date of the Original Agreement and as of the Closing Date as though made as of such time, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct as of such earlier date), in each case, other than for failures of such representations and warranties of Sellers to be so true and correct which do not have or are not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect, and (ii) the Seller Fundamental Representations and Section 4.05(a) shall be true and correct in all material respects as of the date of the Original Agreement and as of the Closing Date as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date).

 

 

(b) Covenants of Sellers. Sellers shall have duly performed and complied in all material respects with all of the covenants, acts, agreements and undertakings required to be performed by each of them under this Agreement on or prior to the Closing.

 

(c) Third Party Consents. Buyer shall have received the Third Party consent set forth in Schedule 7.02(c).

 

(d) Business Audit. Sellers shall have delivered the completed Business Audit to Buyer, and such Business Audit shall not have any deviations from the Unaudited Financial Statements that result in a Material Adverse Effect.

 

(e) No Material Adverse Effect. No Material Adverse Effect has occurred and is continuing since the date of the Original Agreement.

 

(f) Deliveries. Sellers shall have made all of the deliveries to Buyer set forth in Section 3.02(a) hereof (other than deliveries to be made at the Closing) and all agreements required to be delivered pursuant to Section 3.02(a) shall be in full force and effect as of the Closing.

 

Section 7.03. Conditions to Obligation of Sellers. The obligations of Sellers to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment or written waiver (to the extent permitted by Law) by Sellers, at or prior to the Closing, of each of the following conditions:

 

(a) Representations and Warranties. (i) The representations and warranties of Buyer contained in this Agreement (other than the Buyer Fundamental Representations and Section 5.07) shall be true and correct (without giving effect to any qualifications or limitations contained therein as to materiality or Buyer Material Adverse Effect) as of the date of the Original Agreement and as of the Closing Date as though made as of such time, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct as of such earlier date), in each case, other than for failures of such representations and warranties of Buyer to be so true and correct which do not have or are not reasonably likely to have, individually or in the aggregate, a Buyer Material Adverse Effect, and (ii) the Buyer Fundamental Representations and Section 5.07 shall be true and correct in all material respects as of the date of the Original Agreement and as of the Closing Date as though made on and as of such date and time (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date).

 

 

(b) Covenants of Buyer. Buyer shall have duly performed and complied in all material respects with all of the covenants, acts, agreements and undertakings required to be performed by it under this Agreement on or prior to the Closing.

 

(c) Lender Approval. Sellers shall have received evidence that the lender under the Senior Secured Credit Agreement has consented to and approved the transactions contemplated by this Agreement.

 

(d) No Buyer Material Adverse Effect. No Buyer Material Adverse Effect has occurred and is continuing since the date of the Original Agreement.

 

(e) Deliveries. Buyer shall have made all of the deliveries to Sellers set forth in Section 3.02(b) hereof (other than deliveries to be at the Closing) and all agreements required to be delivered pursuant to Section 3.02(b) shall be in full force and effect as of the Closing.

 

ARTICLE VIII

INDEMNIFICATION

 

Section 8.01. Survival. None of the respective representations, warranties, covenants or agreements of the Parties contained in this Agreement shall survive the Closing, except that:

 

(a) the representations and warranties of Sellers as to the matters set forth in Article IV of this Agreement (the “Seller Surviving Representations”), and a Party’s right to indemnification pursuant to Sections 8.02(a) shall survive the Closing until the date that is fifteen (15) months after the Closing Date (the “Cutoff Date”); provided that (i) the Seller Fundamental Representations and the representations and warranties set forth in Section 4.07(a) (Title to Transferred Assets) shall survive the Closing for five (5) years after the Closing, (ii) the representations and warranties set forth in Section 4.16 (Taxes) shall survive until the expiration of the applicable statute of limitations plus sixty (60) days, (iii) the representations and warranties set forth in Section 4.09(j) (Critical IP Licenses) shall survive the Closing for two (2) years after the Closing, and (iv) any Claims for Fraud of a Party shall survive the Closing until the expiration of the applicable statute of limitations;

 

(b) the representations and warranties of Buyer as to the matters set forth in Article V of this Agreement (the “Buyer Surviving Representations”) shall survive the Closing until the Cutoff Date; provided that the Buyer Fundamental Representations shall survive for five (5) years after the Closing; and

 

(c) any covenant or agreement which by its terms is to be performed after the Closing shall survive until such covenant or agreement has been fully performed in accordance with the terms of this Agreement and any Claims with respect thereto shall survive the Closing for the same periods (each of the periods referenced in Sections 8.01(a), (b) and (c), a “Survival Period”).

 

Notwithstanding the foregoing, any Claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching Party to the breaching Party prior to the expiration date of the applicable Survival Period shall not thereafter be barred by the expiration of such Survival Period and such Claims shall survive until finally resolved.

 

 

Section 8.02. Indemnification by Sellers. Subject to the other terms and conditions of this Article VIII, from and after the Closing, Sellers, jointly and severally, shall indemnify each of Buyer and its Affiliates and their respective Representatives (collectively, the “Buyer Indemnitees”) against, and shall hold the Buyer Indemnitees harmless from and against, any and all Losses incurred or sustained by, or imposed upon, the Buyer Indemnitees based upon, arising out of or with respect to:

 

(a) any inaccuracy in or breach of any of Seller Surviving Representations;

 

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Sellers pursuant to this Agreement; or

 

(c) any Excluded Asset or any Excluded Liability.

 

Section 8.03. Indemnification by Buyer. Subject to the other terms and conditions of this Article VIII, from and after the Closing, Buyer shall indemnify each of Seller and its Affiliates and their respective Representatives (collectively, the “Seller Indemnitees”) against, and shall hold the Seller Indemnitees harmless from and against, any and all Losses incurred or sustained by, or imposed upon, the Seller Indemnitees based upon, arising out of or with respect to:

 

(a) any inaccuracy in or breach of any of the Buyer Surviving Representations;

 

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be performed by Buyer pursuant to this Agreement; or

 

(c) any Assumed Liability.

 

Section 8.04. Certain Limitations. The Party making a Claim under this Article VIII is referred to as the “Indemnified Party”, and the Party against whom such Claims are asserted under this Article VIII is referred to as the “Indemnifying Party”. The indemnification provided for in Section 8.02 and Section 8.03 shall be subject to the following limitations:

 

(a) Notwithstanding anything to the contrary contained in this Article VIII, any amount payable pursuant to Section 8.02 in respect of any Losses under such Section 8.02 (i) shall be decreased to the extent that the amount of such Losses were included in the final determination of Net Working Capital and (ii) shall be determined without duplication of recovery in the event of Losses arising from or relating to a breach of more than one covenant or agreement for which indemnification is provided under Section 8.02.

 

 

(b) The Indemnifying Party shall not be liable to the Indemnified Party for indemnification under Section 8.02(a) or Section 8.03(a) (other than with respect to the Seller Fundamental Representations and the Buyer Fundamental Representations, respectively, and the representations and warranties set forth in Section 4.09(j)), as the case may be, until the aggregate amount of all Losses in respect of indemnification under Section 8.02(a) or Section 8.03(a) (other than with respect to the Seller Fundamental Representations and the Buyer Fundamental Representations, respectively, and the representations and warranties set forth in Section 4.09(j)) exceeds $350,000 (the “Deductible”), in which event the Indemnifying Party shall only be required to pay or be liable for Losses in excess of the Deductible. Without limiting the generality of the foregoing, no Indemnifying Party shall be liable hereunder with respect to any individual claim, or series of claims arising from the same set of circumstances, that results in otherwise indemnifiable Losses under Section 8.02(a) or Section 8.03(a) (other than with respect to the Seller Fundamental Representations and the Buyer Fundamental Representations, respectively, and the representations and warranties set forth in Section 4.09(j)), and such Losses shall not be counted toward satisfaction of the Deductible, unless such Losses exceed $25,000.

 

(c) The aggregate amount of all Losses for which an Indemnifying Party shall be liable (i) pursuant to Section 8.02(a) (other than the Seller Fundamental Representations and the representations and warranties set forth in Section 4.09(j) and Section 4.16) or Section 8.03(a) (other than the Buyer Fundamental Representations) shall not exceed $3,000,000 and (ii) pursuant to Section 8.02(a) (solely with respect to the Seller Fundamental Representations and the representations and warranties set forth in Section 4.09(j) and Section 4.16), Section 8.02(b) or Section 8.02(c), or pursuant to Section 8.03(a) (solely with respect to the Buyer Fundamental Representations), Section 8.03(b) or Section 8.03(c), as the case may be, shall not exceed $45,000,000. Notwithstanding anything herein to the contrary, in no event shall the maximum aggregate amount of Losses that may be recovered by an Indemnified Party from an Indemnifying Party under this Agreement exceed $45,000,000.

 

(d) Payments by an Indemnifying Party pursuant to Section 8.02 or Section 8.03 in respect of any Loss shall be reduced by an amount equal to any Tax benefit realized or reasonably expected to be realized as a result of such Loss by the Indemnified Party.

 

(e) It is expressly agreed and acknowledged by the Parties that for purposes of a Party’s right to indemnification pursuant to Sections 8.02(a) and 8.03(a), the representations and warranties of Sellers or Buyer, as applicable, (other than in the case of the representations and warranties contained in Section 4.04(a) (Financial Statements), Section 4.05(a) (Absence of Certain Changes), Section 4.09(j) (Critical IP Licenses), Section 4.12(b) (Permits), Section 4.14(a) (Employee Benefit Matters), Section 5.07 (Absence of Certain Changes), and Section 5.08(b) (Financial Statements), and the definitions of “Material Contracts”, “Material Customers”, and “Material Suppliers”, in each case which shall be qualified as set forth therein), shall not be deemed qualified by any references to materiality or to material adverse effect or words of similar import contained in such representation or warranty.

 

 

Section 8.05. Indemnification Procedures.

 

(a) If any Indemnified Party receives notice of the assertion or commencement of any Claim made or brought by any Person who is not a party to this Agreement or an Affiliate of a party to this Agreement or a Representative of the foregoing (a “Third Party Claim”) against such Indemnified Party with respect to which the Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnified Party shall give the Indemnifying Party prompt written notice thereof. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party is actually prejudiced by such delay or failure. Such notice by the Indemnified Party shall describe the Third Party Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. Within twenty (20) days after delivery of such notification, the Indemnifying Party shall have the right to, upon written notice thereof to the Indemnified Party, assume control of and conduct, at the Indemnifying Party’s sole cost and expense, the defense of such Third Party Claim (with counsel reasonably satisfactory to the Indemnified Party); provided, that as a condition precedent to the Indemnifying Party’s right to assume and conduct such defense, within twenty (20) after the Indemnified Party has given notice of such Third Party Claim, (A) the Indemnifying Party must notify the Indemnified Party in writing that the Indemnifying Party shall undertake the defense of such Third Party Claim and (B) the Indemnifying Party must agree in writing with the Indemnified Party to indemnify the Indemnified Party from and against Losses that the Indemnified Party may suffer or incur or to which the Indemnified Party may otherwise become subject and which arise from or as a result of or are connected with such Third Party Claim to the extent such Losses are indemnifiable under this Article VIII. If the Indemnifying Party undertakes the defense of such Third Party Claim in accordance with this Section, the Indemnified Party will, at the expense of Indemnifying Party, cooperate in such defense; provided that the Indemnifying Party shall not, without the written consent of the Indemnified Party (which consent will not be unreasonably withheld, conditioned or delayed), consent to the entry of any judgment or enter into any settlement with respect to such Third Party Claim if such judgment or settlement (i) provides for any relief other than the payment of monetary damages, (ii) does not include as an unconditional term thereof the giving by the third party claimant to the Indemnified Party of a release from all Liability in respect thereof, and/or (iii) commits the Indemnified Party to take, or to forbear to take, any action. After written notice to the Indemnified Party of the Indemnifying Party’s election to assume the defense of such Third Party Claim, the Indemnifying Party shall not be liable to such Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof. Notwithstanding the foregoing, the Indemnifying Party may not assume control of the defense of or conduct the defense of any Third Party Claim to the extent such claim constitutes a Third Party Claim (A) involving any criminal or quasi-criminal Proceeding, action, indictment, allegation or investigation or seeking to impose any criminal penalty, fine or other sanction, (B) made by any Governmental Authority, (C) in which relief other than monetary Losses is sought, including any injunctive or other equitable relief, or (D) whereby the Indemnified Party has been advised by counsel in writing that a reasonable likelihood exists of a conflict of interest between the Indemnifying Party and the Indemnified Party. Section 6.05(f), and not this Section 8.05, shall govern the conduct and control of any Tax Matter.

 

(b) If the Indemnifying Party does not so assume or does not have the right to so assume control of the defense of a Third Party Claim, the Indemnified Party shall control such defense. The Indemnifying Party may participate in such defense, and may hire separate counsel at its own expense. The Indemnified Party shall keep the Indemnifying Party reasonably advised of the status of such Third Party Claim and the defense thereof and shall consider in good faith recommendations made by the Indemnifying Party with respect thereto. The parties shall reasonably cooperate in the defense of any Third Party Claim, with such cooperation to include furnishing the party controlling such defense with such information as it may have with respect to such Third Party Claim (including copies of any summons, complaint or other pleading which may have been served on such party and any written claim, demand, invoice, billing or other document evidencing or asserting the same), and shall otherwise reasonably assist in the defense of such Third Party Claim, including by (i) furnishing and, upon request, procuring the attendance of potential witnesses for interview, preparation, submission of witness statements and the giving of evidence at any related hearing, (ii) promptly furnishing documentary evidence to the extent available to it or its Affiliates, and (iii) providing access to any other relevant party, including any Representatives of such party as reasonably needed. The Indemnified Party shall not agree to any settlement of, or the entry of any judgment arising from, any such Third Party Claim without the prior written consent of the Indemnifying Party (which consent shall not be unreasonably withheld, delayed or conditioned).

 

 

(c) Any Claim by an Indemnified Party on account of a Loss which does not result from a Third Party Claim (a “Direct Claim”) shall be asserted by the Indemnified Party giving the Indemnifying Party prompt written notice thereof. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party forfeits rights or defenses by reason of such failure or is otherwise actually prejudiced by such failure. Such notice by the Indemnified Party shall describe the Direct Claim in reasonable detail, shall include copies of all material written evidence thereof and shall indicate the estimated amount, if reasonably practicable, of the Loss that has been or may be sustained by the Indemnified Party. The Indemnifying Party shall have thirty (30) days after its receipt of such notice to respond in writing to such Direct Claim. During such thirty (30) day period, the Indemnified Party shall allow the Indemnifying Party and its professional advisors to investigate the matter or circumstance alleged to give rise to the Direct Claim, and whether and to what extent any amount is payable in respect of the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s investigation by giving such information and assistance (including access to the Indemnified Party’s premises and personnel and the right to examine and copy any accounts, documents or records) as the Indemnifying Party or any of its professional advisors may reasonably request. If the Indemnifying Party does not so respond within such thirty (30) day period, the Indemnifying Party shall be deemed to have rejected such Claim, in which case the Indemnified Party shall be free to pursue such remedies as may be available to the Indemnified Party on the terms and subject to the provisions of this Agreement.

 

Section 8.06. Tax Treatment of Indemnification Payments. All indemnification payments made under this Agreement shall be treated by the Parties as an adjustment to the Purchase Price for Tax purposes, unless otherwise required by Law.

 

Section 8.07. Mitigation; Insurance. Each Indemnified Party shall take, and shall cause its Affiliates to take, all commercially reasonable steps to mitigate any Losses upon becoming aware of any event which would reasonably be expected to, or does, give rise thereto. To the extent that any Indemnified Party obtains recovery in respect of any Indemnification Claims from any Third Parties (including any insurers), such Indemnified Party shall first use the funds provided by such recovery (in lieu of funds provided by any other Party pursuant to the indemnification provisions of this Article VIII) to pay or otherwise satisfy such Indemnification Claims and the amount of any Losses with respect to any Indemnification Claim for which indemnification is available under this Article VIII shall be reduced by the amount of such insurance proceeds or other such funds realized or paid to the Indemnified Party. If, after the making of any payment in respect of an Indemnification Claim under this Article VIII, the amount of the Losses to which such payment relates is reduced by recovery, settlement or otherwise under any insurance coverage, or pursuant to any Claim, recovery, settlement or payment by or against any other Person, the amount of such reduction will promptly be repaid by the Indemnified Party to the Indemnifying Party.

 

 

Section 8.08. Cooperation; Access to Documents and Information. The Parties shall reasonably cooperate with each other in connection with resolving any Indemnification Claims. Without limiting the generality of the foregoing, any Indemnified Party who desires to assert an Indemnification Claim pursuant to this Agreement shall (a) provide to the Indemnifying Party copies of all documents, books, records and other information relating to such Indemnification Claim which are in the possession of the Indemnified Party or its Affiliates or can be obtained by the Indemnified Party without undue cost or expense as promptly as practicable and (b) give the Indemnifying Party reasonable access from time to time to the accounting and other appropriate personnel and the independent accountants of the Indemnified Party and its Affiliates (and, if the Indemnification Claim relates to Leased Real Property, reasonable access during normal business hours to such Leased Real Property) in order to permit the Indemnifying Party to obtain information reasonably required to evaluate such Indemnification Claim.

 

Section 8.09. Exclusive Remedies. Subject to Section 10.12, the Parties acknowledge and agree that their sole and exclusive remedy with respect to any and all Claims (other than Claims arising from Fraud on the part of a Party in connection with the transactions contemplated by this Agreement) for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement, shall be pursuant to the indemnification provisions set forth in this Article VIII. In furtherance of the foregoing, each Party hereby waives, to the fullest extent permitted under Law, any and all rights and Claims for any breach of any representation, warranty, covenant, agreement or obligation set forth herein or otherwise relating to the subject matter of this Agreement it may have against the other Parties and their Affiliates and each of their respective Representatives arising under or based upon any Law, except pursuant to the indemnification provisions set forth in this Article VIII. Nothing in this Section 8.09 shall limit any Person’s right to seek and obtain any equitable relief to which any Person shall be entitled pursuant to Section 10.12 or to seek any remedy on account of any Fraud by any Party.

 

Section 8.10. Manner of Payment.

 

(a) Any amount payable by Sellers to Buyer pursuant to this Article VIII or as an adjustment to the Purchase Price hereunder (such amount, the “Indemnification Payment Amount”) not exceeding $1,000,000 in the aggregate shall be payable, at the election of Sellers, either by (i) wire transfer of immediately available funds to an account or accounts designated by Buyer, (ii) surrendering a number of Consideration Units equal to the quotient of (A) the Indemnification Payment Amount divided by (B) $1,000.00, with any fractional number of Units to be rounded up or down, as applicable, to the nearest whole number, or (iii) surrendering a number of shares of Common Stock equal to the quotient of (A) the Indemnification Payment Amount divided by (B) the Buyer Stock Price (rounded down to the nearest whole number) to Buyer, in each case, within five (5) Business Days following the final determination of the claim for indemnification giving rise to such payment obligation. Any Indemnification Payment Amount payable by Sellers to Buyer in excess of $1,000,000 shall be payable by wire transfer of immediately available funds to an account or accounts designated by Buyer within five (5) Business Days following the final determination of the claim for indemnification giving rise to such payment obligation.

 

 

(b) Any amount payable by Buyer to Sellers pursuant to this Article VIII shall be payable by wire transfer of immediately available funds to an account or accounts designated by Sellers within five (5) Business Days following the final determination of the claim for indemnification giving rise to such payment obligation.

 

ARTICLE IX

TERMINATION

 

Section 9.01. Termination. This Agreement may be terminated at any time prior to the Closing:

 

(a) by either Sellers or Buyer if the Closing shall not have occurred on or prior to December 4, 2020 (the “Termination Date”); provided, however, that the right to terminate this Agreement under this Section 9.01(a) shall not be available to any Party whose action or failure to fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted in, the failure of the Closing to occur on or prior to such date;

 

(b) by either Buyer or Sellers in the event that any Governmental Order restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement shall have become final and non-appealable; provided, that the right to terminate this Agreement pursuant to this Section 9.01(b) shall not be available to any Party whose action or failure to fulfill any obligations under this Agreement has been the cause of, or resulted in, the issuance of such Governmental Order;

 

(c) by Sellers if Buyer shall have breached any of its representations, warranties, covenants or agreements contained in this Agreement, in each case, which would give rise to the failure of a condition set forth in Article VII, which breach cannot be or has not been cured by the earlier of thirty (30) days after receipt of the written notice from Sellers specifying such breach and the Termination Date; provided, that Sellers shall not have the right to terminate this Agreement pursuant to this Section 9.01(c) if a Seller is then in breach of its representations, warranties, covenants or agreements contained in this Agreement which would give rise to the failure of a condition set forth in Article VII;

 

(d) by Buyer if a Seller shall have breached any of its representations, warranties, covenants or agreements contained in this Agreement, in each case, which would give rise to the failure of a condition set forth in Article VII, which breach cannot be or has not been cured by the earlier of thirty (30) days after receipt of the written notice from Buyer specifying such breach and the Termination Date; provided, that Buyer shall not have the right to terminate this Agreement pursuant to this Section 9.01(d) if Buyer is then in breach of its representations, warranties, covenants or agreements contained in this Agreement which would give rise to the failure of a condition set forth in Article VII; or

 

(e) by the mutual written consent of Sellers and Buyer.

 

 

Section 9.02. Effect of Termination. In the event of termination of this Agreement as provided in Section 9.01, written notice thereof shall be given to the other Parties and this Agreement shall forthwith become void and there shall be no liability on the part of either Party or their respective Affiliates, directors, officers or employees except (a) Section 6.06, this Article IX, and Article X shall remain in full force and effect, and (b) that nothing herein shall relieve either Party from liability for any knowing and intentional breach of this Agreement occurring prior to such termination.

 

Section 9.03. Termination Fee. In the event of a termination of this Agreement pursuant to Section 9.01(a) (if and only if terminated at a time when the “Initial Closing” under the NCP Subscription Agreement has not been completed) or Section 9.01(c) (if and only if terminated at a time when the Initial Closing has not been completed), Buyer shall pay to Parent and/or Sellers, by way of compensation, a fee of $1,000,000 (collectively, the “Termination Fee”), in each case, within one (1) Business Day after the date of the termination of this Agreement by Sellers pursuant to Section 9.01(a) or Section 9.01(c) and, in the event of a termination by Buyer pursuant to Section 9.01(a), concurrently with, and as a condition precedent to, the termination of this Agreement, by wire transfer of immediately available funds to an account designated in writing by Parent and/or Sellers; provided that Buyer shall not be required to pay the Termination Fee on more than one occasion. Buyer acknowledges that the agreements contained in this Section 9.03 are an integral part of the transactions contemplated by this Agreement and that, without these agreements, Parent and Sellers would not enter into this Agreement. Accordingly, if Buyer fails promptly to pay any amount due pursuant to this Section 9.03, Buyer shall also pay any reasonable and documented costs, fees and expenses incurred by Parent and/or Sellers (including reasonable attorneys’ fees) in connection with a legal action to enforce this Agreement that results in a judgment for such amount or any portion thereof against Buyer or its Affiliates. Any amount not paid when due pursuant to this Section 9.03 shall bear interest from the date such amount is due until the date paid at a rate equal to LIBOR plus 8%. Notwithstanding anything to the contrary in this Agreement, except in the event of (i) an intentional breach by Buyer of any representation, warranty, covenant, or agreement in this Agreement or (ii) Buyer’s Fraud, if this Agreement is terminated in circumstances requiring the payment of the Termination Fee to Parent and/or Sellers, the payment in full of the Termination Fee by Buyer to Parent and/or Sellers, together with any interest, costs, fees or expenses payable, in each case in accordance with this Section 9.03, shall be the sole and exclusive remedy of Parent and Sellers against Buyer and its Affiliates, and upon such payment, except in the event of such an intentional breach or Fraud, none of Buyer or any of its Affiliates shall have any further liability or obligation (whether at Law or equity, in contract, in tort or otherwise) to Parent and Sellers arising out of this Agreement, any Ancillary Agreement or any of the transactions contemplated hereby or thereby. The Parties acknowledge and agree that (i) the agreements contained in this Section 9.03 are an integral part of the transactions contemplated by this Agreement; (ii) the damages resulting from the termination of this Agreement under circumstances where the Termination Fee is payable are uncertain and incapable of accurate calculation; and (iii) without these agreements, the Parties would not enter into this Agreement. Therefore, the Termination Fee, if, as and when required to be paid pursuant to this Section 9.03 will not constitute a penalty but rather liquidated damages in a reasonable amount that will compensate Parent and Sellers receiving such amount in the circumstances in which it is payable for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the transactions contemplated by this Agreement; provided that payment of the Termination Fee shall not constitute liquidated damages in the case of Fraud or an intentional breach of this Agreement.

 

 

ARTICLE X

MISCELLANEOUS

 

Section 10.01. Expenses. Except as otherwise expressly provided herein (including pursuant to Section 6.15 and Section 6.16), all costs and expenses, including, fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the Party incurring such costs and expenses, whether or not the Closing shall have occurred.

 

Section 10.02. Notices. All notices, requests, consents, Claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand; (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the third (3^rd) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 10.02):

 

If to Sellers:

 

Ribbon Communications Inc.
4 Technology Park Drive
Westford, Massachusetts 01886
Attention: Patrick Macken, EVP and Chief Legal Officer
E-Mail: [email protected]

 

with a copy to (which shall not constitute notice):

 

Latham & Watkins LLP
885 Third Avenue
New York, NY 10022-4834
Attention: David Allinson; Jane Greyf
E-Mail: [email protected]; [email protected]

 

If to Buyer: American Virtual Cloud Technologies, Inc.

 

1720 Peachtree Street, Suite 629
Atlanta, Georgia 30309
Attention: Thomas King, Chief Financial Officer
E-Mail: [email protected]

 

 

with a copy to (which shall not constitute notice):

 

Greenberg Traurig, LLP
Terminus 200, Suite 2500
3333 Piedmont Road, NE
Atlanta, Georgia 30305
Attention: David R. Yates; Theodore I. Blum
E-Mail: [email protected]; [email protected]

 

Section 10.03. Interpretation. For purposes of this Agreement, (a) the words “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”; (b) the word “or” is not exclusive; (c) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole; (d) all references to currency herein shall be to, and all payments required hereunder shall be paid in, U.S. Dollars unless a different currency is specifically stated; (e) any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular; (f) unless the context of this Agreement clearly requires otherwise, words importing the masculine gender shall include the feminine and neutral gender and vice versa; (g) whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified; and (h) references from or through any date mean, unless otherwise specified, from and including or through and including, respectively. Unless the context otherwise requires, references herein: (x) to Articles, Sections, Disclosure Schedules and Exhibits mean the Articles and Sections of, and Disclosure Schedules and Exhibits attached to, this Agreement; (y) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and (z) to a statute means such statute as amended from time to time and includes any successor legislation thereto and any regulations promulgated thereunder. This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the Party drafting an instrument or causing any instrument to be drafted. The Disclosure Schedules and Exhibits referred to herein shall be construed with, and as an integral part of, this Agreement to the same extent as if they were set forth verbatim herein.

 

Section 10.04. Headings. The headings in this Agreement are for reference only and shall not affect the interpretation of this Agreement.

 

Section 10.05. Severability. If any term or provision of this Agreement is invalid, illegal or unenforceable in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable such term or provision in any other jurisdiction. Upon such determination that any term or other provision is invalid, illegal or unenforceable, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the greatest extent possible.

 

Section 10.06. Entire Agreement. This Agreement, the Confidentiality Agreement and the Ancillary Agreements constitute the sole and entire agreement of the Parties with respect to the subject matter contained herein and therein, and supersede all prior and contemporaneous representations, warranties, understandings and agreements, both written and oral, with respect to such subject matter. In the event of any inconsistency between the statements in the body of this Agreement and those in the Ancillary Agreements, the Exhibits and Disclosure Schedules (other than an exception expressly set forth as such in the Disclosure Schedules), the statements in the body of this Agreement will control.

 

 

Section 10.07. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns. Neither Party may assign its rights or obligations hereunder without the prior written consent of the other Party, which consent shall not be unreasonably withheld or delayed. No assignment shall relieve the assigning Party of any of its obligations hereunder. Notwithstanding the foregoing, Buyer may assign its rights and obligations hereunder at any time to a wholly-owned subsidiary of Buyer without the prior written consent of Sellers; provided that (i) Buyer shall remain liable for its obligations and any obligations of such subsidiary; and (ii) no such assignment without the consent of Sellers shall be permitted to the extent it would result in any incremental withholding or other Tax that is borne by Sellers or any of their Affiliates.

 

Section 10.08. No Third Party Beneficiaries. This Agreement is for the sole benefit of the Parties and their respective successors and permitted assigns and nothing herein, express or implied, is intended to or shall confer upon any other Person or entity any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 10.09. Amendment and Modification; Waiver. This Agreement may only be amended, modified or supplemented by an agreement in writing signed by each Party. No waiver by any Party of any of the provisions hereof shall be effective unless explicitly set forth in writing and signed by the Party so waiving. No waiver by any Party shall operate or be construed as a waiver in respect of any failure, breach or default not expressly identified by such written waiver, whether of a similar or different character, and whether occurring before or after that waiver. No failure to exercise, or delay in exercising, any right, remedy, power or privilege arising from this Agreement shall operate or be construed as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege.

 

Section 10.10. Remedies. Each of the Parties acknowledges and agrees that (i) the provisions of this Agreement are reasonable and necessary to protect the proper and legitimate interests of the other Parties and (ii) the other Parties would be irreparably damaged if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to preliminary and permanent injunctive relief to prevent breaches of the provisions of this Agreement by the other Parties without the necessity of proving actual damages or of posting any bond, and to enforce specifically the terms and provisions hereof, which rights shall be cumulative and in addition to any other remedy to which the Parties may be entitled hereunder or at Law or equity.

 

 

Section 10.11. Governing Law; Venue; Waiver of Jury Trial.

 

(a) This Agreement and any Claim arising from or relating to this Agreement, the transactions contemplated hereby, any relief or remedies sought by any Parties hereto, and the rights and obligations of the Parties hereunder shall be governed by and construed in accordance with the substantive laws of the State of Delaware without regard to the conflicts of law provisions thereof that would cause the laws of any other jurisdiction to apply.

 

(b) Each of the Parties irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Delaware Court of Chancery (or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware) in any action arising out of or relating to this Agreement or any of the matters contemplated hereby. Each of the Parties irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection it may now or hereafter have to the laying of venue of any action arising out of or relating to this Agreement in any such court. Each of the Parties hereby irrevocably waives, to the fullest extent permitted by applicable Law, the defense of an inconvenient forum to the maintenance of such action in any such court. Each of the Parties agrees not to bring any action arising out of or relating to this Agreement or any of the matters contemplated hereby other than in any such court.

 

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE ANCILLARY AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (I) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE SUCH WAIVER, (II) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER, (III) IT MAKES SUCH WAIVER VOLUNTARILY, AND (IV) IT HAS BEEN INDUCED TO ENTER THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS CONTAINED IN THIS SECTION 10.11.

 

Section 10.12. Specific Performance. The Parties agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the Parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.

 

 

Section 10.13. Waiver of Conflicts. Latham & Watkins LLP has acted as legal counsel to Sellers and their respective Affiliates prior to the Closing (the “Prior Counsel”). The Prior Counsel intends to act as legal counsel to Sellers and their respective Affiliates (other than Buyer and its direct and indirect subsidiaries). Buyer hereby waives and agrees not to assert, on its own behalf and agrees to cause its Affiliates to waive and to not assert, any conflicts that may arise in connection with or relating to the Prior Counsel representing Sellers, its Affiliates or any of their respective officers, employees or directors (any such person, a “Designated Person”) after the Closing in any matter involving this Agreement or any of the Ancillary Agreements or the transactions contemplated hereby or thereby, including relating to the Business. Without limiting the foregoing, Buyer and Sellers agree that, following the Closing, Prior Counsel may serve as counsel to any Designated Person in connection with any matters related to this Agreement and the transactions contemplated hereby, including any litigation, claim or obligation arising out of or relating to this Agreement or the transactions contemplated by this Agreement (each a “Business Dispute”) notwithstanding any representation by Prior Counsel prior to the Closing, and Buyer (on behalf of itself and its Subsidiaries (including, after the Closing, the Purchased Subsidiary)) hereby agrees that, in the event that a Business Dispute arises after the Closing between Buyer or any of its respective Subsidiaries (including, after the Closing, the Purchased Subsidiary), on the one hand, and any Designated Person, on the other hand, Prior Counsel may represent one or more Designated Persons in such Business Dispute even though the interests of such Person(s) may be directly adverse to Buyer or its Subsidiaries (including, after the Closing, the Purchased Subsidiary) and even though Prior Counsel may have represented such Purchased Subsidiary in a matter substantially related to such Business Dispute. All communications involving attorney-client confidences between Sellers or their respective Affiliates and Prior Counsel in the course of the negotiation, documentation and consummation of the transactions contemplated by this Agreement (the “Counsel Communications”) shall be deemed to be attorney-client confidences that belong solely to Sellers or their respective Affiliates. Accordingly, Buyer shall not have access to any such communications, or to the files of Prior Counsel relating to its engagement, whether or not the Closing shall have occurred. Buyer (on behalf of itself and its Subsidiaries (including, after the Closing, the Purchased Subsidiary)) hereby waives and will not assert, any attorney-client or other applicable legal privilege or protection with respect to the Counsel Communications or in connection with any post-Closing representation of Sellers, including in connection with a Business Dispute with Buyer or its Subsidiaries (including, following the Closing, any Purchased Subsidiary), it being the intention of the Parties that all such rights to such attorney-client and other applicable legal privilege or protection and to control such attorney-client and other applicable legal privilege or protection shall be retained by Sellers and their respective Affiliates, and that Sellers or their respective Affiliates and not Buyer or its Subsidiaries (including, after the Closing, the Purchased Subsidiary), shall have the sole right to decide whether or not to waive any attorney-client or other applicable legal privilege or protection.

 

Section 10.14. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall be deemed to be one and the same agreement. A signed copy of this Agreement delivered by facsimile, e-mail or other means of electronic transmission shall be deemed to have the same legal effect as delivery of an original signed copy of this Agreement.

 

Section 10.15. Bulk Sales Laws. Buyer hereby agrees to waive any non-compliance by Sellers with respect to the provisions of the “bulk sales”, “bulk transfer” or similar Laws of any state or other jurisdiction in connection with the sale of the Transferred Assets and the Purchased Interests and the other transactions contemplated hereby.

 

[SIGNATURE PAGE FOLLOWS]

 

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.

 

	PARENT:
	Ribbon Communications Inc.
	By:	/s/ Bruce McClelland
	Name:	Bruce McClelland
	Its:	President & Chief Executive Officer
	SELLERS:
	Ribbon Communications Operating Company, Inc.
	By:	/s/ Miguel Lopez
	Name:	Miguel Lopez
	Its:	President & Chief Executive Officer
	Ribbon Communications International Limited
	By:	/s/ Eric S. Marmurek
	Name:	Eric S. Marmurek
	Its:	Director

 

[Signature Page to Amended & Restated Purchase Agreement]

 

 

	BUYER:
	American Virtual Cloud Technologies, Inc.
	By:	/s/ Thomas H. King
	Name:	Thomas H. King
	Its:	Chief Financial Officer

 

 

[Signature Page to Amended and Restated Purchase Agreement]

 

 

Exhibit 4.1

 

THIS DEBENTURE AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN SECTION 3 OF THIS DEBENTURE TO THE SENIOR INDEBTEDNESS (AS DEFINED HEREIN), AND EACH HOLDER OF THIS DEBENTURE, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF SECTIONS 3 AND 12 OF THIS DEBENTURE.

 

THIS DEBENTURE AND ITS HOLDER ARE ALSO SUBJECT TO THE TERMS AND CONDITIONS OF THE PURCHASE AGREEMENT (AS DEFINED BELOW). THIS DEBENTURE MAY NOT BE SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS THE TRANSFEREE, PLEDGEE OR OTHER APPLICABLE PARTY EXECUTES A JOINDER substantially in the form attached as Exhibit B hereto (EXCEPT THAT NOTWITHSTANDING THE FOREGOING, THIS DEBENTURE MAY BE PLEDGED AS COLLATERAL TO THE LENDERS TO HOLDER(S) HEREOF).

 

NEITHER THIS DEBENTURE NOR THE SHARES OF COMMON STOCK INTO WHICH THIS DEBENTURE ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED (EXCEPT AS SET FORTH IN THE IMMEDIATELY PRECEDING PARAGRAPH) OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE COMPANY (AS DEFINED HEREIN) WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED, EXCEPT AS SET FORTH IN SECTION 7.2(D) OF THIS DEBENTURE.

 

CONVERTIBLE DEBENTURE

 

__________ __, 202__

 

$_____

Atlanta, GA

 

No. A1-1

 

AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC., a Delaware corporation (the “Company”), for value received, hereby promises to pay to _____________________ or its registered assigns (“Holder”), the principal sum of _______________________ Dollars ($_____), together with interest thereon as provided herein.

 

 

This Convertible Debenture (this “Debenture”) is being issued pursuant to that certain [Securities Purchase Agreement, dated as of December 1, 2020, to which the Company and the Holder are parties / Amended and Restated Purchase Agreement, dated as of December 1, 2020, among the Holder, Ribbon Communications Operating Company, Inc., Ribbon Communications International Limited and the Company] (the “Purchase Agreement”). Capitalized terms used but not defined herein shall have the meanings given to them in the Purchase Agreement. This Debenture is one of a series of Debentures in substantially the same form being issued to Holder in accordance with the provisions of the Purchase Agreement or that certain [Securities Purchase Agreement, dated as of December 1, 2020, to which the Company and SPAC Opportunity Partners Investment Sub LLC are parties (the “Securities Purchase Agreement”) / Amended and Restated Purchase Agreement, dated as of December 1, 2020, among Ribbon Communications Operating Company, Inc., Ribbon Communications Operating Company, Inc., Ribbon Communications International Limited and the Company (the “Ribbon Purchase Agreement”)] (the “Other Debentures”). This Debenture and the Other Debentures are sometimes referred to collectively as the “Debentures”.

 

1. Definitions. For purposes of this Debenture, the capitalized terms set forth below shall have the following meanings:

 

“Board” means the board of directors of the Company.

 

“Business Day” means each day, other than a Saturday or Sunday, on which banking institutions are not authorized or obligated by law, regulation or executive order to close in Atlanta, Georgia, New York, NY or Dallas, TX.

 

“Change in Control” means any one of the following after the Original Issuance Date and the consummation of the transactions contemplated by the Purchase Agreement and the [Ribbon Purchase Agreement / Securities Purchase Agreement]:

 

(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d) or 14(d) of the Exchange Act) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either (i) the then outstanding shares of Common Stock of the Company (the “Outstanding Company Common Stock”) or (y) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”);

 

(b) Individuals who, as of the Original Issuance Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Original Issuance Date whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, entity or group other than the Board;

 

 

(c) Consummation by the Company of a reorganization, merger, consolidation or other business combination (any of the foregoing, a “Business Combination”) of the Company or any subsidiary of the Company with any other corporation or other entity, in any case with respect to which the Outstanding Company Voting Securities outstanding immediately prior to such Business Combination do not, immediately following such Business Combination, continue to represent (either by remaining outstanding or being converted into voting securities of the resulting or surviving entity or any ultimate parent thereof) more than 55% of the outstanding common stock and of the then outstanding voting securities entitled to vote generally in the election of directors of the resulting or surviving entity (or any ultimate parent thereof); or

 

(d) (i) Consummation of a sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation or other person or entity with respect to which, following such sale or other disposition, more than 55% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities as the case may be; or (ii) stockholder approval of a complete liquidation or dissolution of the Company.

 

“Common Stock” means the Company’s common stock, par value $0.0001 per share.

 

“Conversion Price” means $3.45, as may be adjusted from time to time as set forth in this Debenture.

 

“Original Issuance Date” means December 1, 2020.

 

“Senior Credit Agreement” means that certain Credit Agreement dated as of December 18, 2017, by and among Stratos Management Systems, Inc., a Delaware corporation, as the prior borrower, Stratos Management Systems Holdings, LLC, as parent of such prior borrower, and Senior Lender, as assigned and assumed by Stratos Management Systems, Inc. (formerly known as Tango Merger Sub Corp.), a Delaware corporation, and the Company, collectively, as the new co-borrowers thereunder, pursuant to that certain Third Amendment to Loan Documents dated as of the date hereof, or any credit agreement entered into by the Company and/or one or more of its subsidiaries in replacement of such Credit Agreement, including all amendments, modifications or supplements to any of the foregoing.

 

“Senior Credit Default” means any “Event of Default” as such term is defined in the Senior Credit Agreement.

 

“Senior Credit Facility” means collectively, all financial accommodations extended by Senior Lender to Company and the other “Borrowers” under the Senior Credit Agreement, including in each case, all deferrals, renewals, extensions, replacements or refundings of such facility.

 

 

“Senior Credit Termination” means the date upon which (a) the Senior Indebtedness (other than contingent obligations with respect thereto) are satisfied in full and (b) all commitments of Senior Lender to extend financial accommodations with respect to the Senior Credit Facility have been terminated.

 

“Senior Lender” means Comerica Bank (together with its successors and assigns) or any other lender under any credit agreement entered into by the Maker and/or one or more of its subsidiaries in replacement of the Senior Credit Agreement.

 

“Senior Loan Documents” means the “Loan Documents” as such term is defined in the Senior Credit Agreement, including all amendments, modifications or supplements thereto.

 

“Trading Day” means any day on which the Common Stock is traded for any period on the over-the-counter bulletin board or on the principal securities exchange or other securities market on which the Common Stock is then being traded.

 

“Triggering Event” means the occurrence, at any time after the Original Issuance Date, of the closing price of the Common Stock on the principal trading market for the Common Stock for any 40 Trading Days within a consecutive 60 Trading Day-period exceeding $6.00, as adjusted for stock splits, stock dividends, reorganizations and recapitalizations affecting the Common Stock and the Original Issuance Date.

 

2. Payments. 

 

(a) Beginning on the issuance date of this Debenture (the “Issuance Date”), the outstanding principal balance of this Debenture shall bear interest, in arrears, at a rate per annum equal to ten percent (10%) (the “Base Rate”). Accrued interest hereunder shall be payable quarterly on March 31, June 30, September 30 and December 31 of each calendar year (each, an “Interest Payment Date”), with the first such payment to be made on the first Interest Payment Date occurring after the Issuance Date. Such first payment shall include interest only from the Issuance Date until such Interest Payment Date. Accrued interest on this Debenture shall be added to the principal sum of this Debenture on each Interest Payment Date (and the increased principal amount shall be reflected on the Company’s books and records as of each such Interest Payment Date and interest shall accrue on such increased principal amount commencing on each Interest Payment Date), except upon maturity in which case accrued and unpaid interest not previously added to the principal sum of this Debenture shall be paid in cash. Interest shall be computed on the basis of a 360-day year of twelve (12) 30-day months and shall accrue commencing on the Issuance Date. Notwithstanding the foregoing, upon and following the occurrence of an Event of Default (as defined below), from the date of the Event of Default until such Event of Default is cured, the Base Rate shall be increased to the lower of (i) fourteen percent (14%) and (ii) the maximum applicable legal rate per annum (such lower rate, the “Default Rate”) and interest shall be payable in cash.

 

(b) Subject to the provisions of Section 4 hereof relating to the conversion of this Debenture, the entire principal sum hereof, together with accrued and unpaid interest thereon, shall be due and payable in cash on the earlier to occur of (i) such date, commencing on or after the thirty (30)-month anniversary of the Original Issuance Date, as the Holder, at its sole option, upon not less than thirty (30) days’ prior written notice to the Company, demands payment hereof and (ii) the occurrence of a Change in Control. In advance of consummating any Change in Control, the Company shall provide the Holder with at least thirty (30) days’ prior written notice. This Debenture shall not amortize.

 

 

(c) If any day on which any amount is payable under this Debenture is not a Business Day, then the amount otherwise payable on that date will be made on the next succeeding day that is a Business Day (without any interest or other payment in respect of such delay).

 

(d) In the event of any partial payment of principal or accrued interest, for whatever reason, any such partial payment of principal and/or interest on the Debentures shall be allocated among the respective Debentures and holders thereof so that the amount of such payments to each holder shall bear as nearly as practicable the same ratio to the aggregate amount then to be paid as the principal amount of the Debentures then held by such holder bears to the aggregate principal amount of Debentures then outstanding.

 

3. Ranking and Subordination. Except as set forth in this Section 3, the indebtedness evidenced by this Debenture shall rank equal in right of payment with all existing and future senior indebtedness of the Company. The indebtedness evidenced by this Debenture and the guaranty described in Section 14 and the other indebtedness, obligations and liabilities of the Company, Computex and its subsidiaries under the Purchase Agreement owing to Holder (collectively, the “Subordinated Indebtedness”) are subordinate and junior to the prior payment in full of all Senior Indebtedness (as defined below) to the extent and in the manner hereinafter set forth. The Holder agrees, from time to time as reasonably requested by the Company, to execute any documents reasonably required by the Company’s lenders reaffirming the subordination provisions contained in this Debenture; provided, however, that the existing rights of the Holder shall not be adversely affected thereby. For purposes of this Debenture and the guaranty described in Section 14, the term “Senior Indebtedness” shall mean all senior indebtedness, obligations and liabilities of the Company, Computex and Computex’s subsidiaries, whether outstanding on the date hereafter or thereafter created, incurred, assumed, guaranteed or in effect, in each case, under the Senior Credit Facility, together with all other sums due thereon and all costs of collecting the same (including, without limit, reasonable attorney fees) for which such Person is or at any time may be liable.

 

For the avoidance of doubt, Company shall have the right to pay (or cause to be paid) to Holder, and Holder shall have the right to receive and accept from Company, AVCTechnologies USA, Inc., American Virtual Cloud Technologies Ireland Limited, Computex and Computex’s subsidiaries, any and all regularly scheduled payments of the Subordinate Indebtedness (or any portion thereof) due to Holder pursuant to the terms and provisions of this Debenture (including, without limitation, Section 2(a) and 2(b) hereof), the guaranty described in Section 14, and/or the Purchase Agreement as and when such payments become due and payable; provided, that (x) no Senior Credit Default (I) has occurred and is continuing as of the date of the proposed payment to Holder, or (II) would otherwise result from such proposed payment being made to Holder and (y) no Insolvency Proceeding (as defined below) has occurred.

 

In the event of any Insolvency Proceeding, the Senior Lender shall be entitled to receive payment in full of all Senior Indebtedness before Holder is entitled to receive any subsequent payment on account of any Subordinated Indebtedness; provided, however, that (x) in no event shall any such subordination impair the ability of the Company to issue or the rights of the Holder to receive additional Debentures in respect of accrued and unpaid interest in accordance with Section 2 hereof and (y) the foregoing shall not be deemed to require the repayment or reimbursement by Holder to Senior Lender of any amounts permitted to be received by Holder with respect to the Subordinated Indebtedness in compliance with this Section 3 prior to the occurrence of such Insolvency Proceeding.

 

 

During the continuance of any Senior Credit Default, no cash payment shall be made with respect to the Subordinated Indebtedness (or any renewals or extensions thereof) if written or telegraphic notice of such event of default has been received by the Company from the Senior Lender pursuant to Section 13 of the Senior Credit Agreement. Should any payment, distribution or security or proceeds from these be received by Holder upon or with respect to the Subordinated Indebtedness that is not otherwise permitted under this Section 3 prior to the Senior Credit Termination, Holder shall immediately deliver same to the Senior Lender in the form received (except for endorsement or assignment by Holder where required by the Senior Lender), for application on the Senior Indebtedness (whether or not then due and in such order of maturity as the Senior Lender elects) and, until so delivered, the same shall be held in trust by Holder as the property of the Senior Lender.

 

Until the Senior Credit Termination, upon the occurrence and during the continuance of any Senior Credit Default (and written notice thereof to the Company by the Senior Lender as described in the immediately preceding paragraph) and/or any Insolvency Proceeding, Holder will not (without the prior consent of Senior Lender) ask for, demand, sue for, take or receive (by way of voluntary payment, acceleration, set-off or counterclaim, foreclosure or other realization on security, dividends in bankruptcy or otherwise), or offer to make any discharge or release of, any of the Subordinated Indebtedness, and Holder waives any such rights with respect to the Subordinated Indebtedness. Holder shall not exercise any rights of subrogation or other similar rights with respect to the Senior Indebtedness until the Senior Credit Termination. This Section 3 constitutes a continuing agreement of subordination, as of any date prior to the Senior Credit Termination, even though the outstanding balance of the Senior Indebtedness may, from time to time, be zero.

 

As of the date hereof, the Subordinated Indebtedness is unsecured. To the extent the Subordinated Indebtedness is ever secured by collateral also securing the Senior Indebtedness (referenced herein as “Shared Collateral”) and until the Senior Credit Termination, Holder agrees it will not (without the prior consent of Senior Lender) exercise any of Holder’s rights in any such Shared Collateral now or later securing the Subordinated Indebtedness. As of any date prior to the Senior Credit Termination, all rights of Holder in any Shared Collateral now or later securing the Subordinated Indebtedness are subordinated to all rights of the Senior Lender now or later existing in any of the same Shared Collateral. The relative priorities of the Senior Lender and Holder in any Shared Collateral as set forth in this Section 3 control irrespective of the time, method or order of attachment or perfection of the liens and security interests acquired by the parties in the Shared Collateral and irrespective of the priorities as would otherwise be determined by reference to the Uniform Commercial Code or other applicable laws. As of any date prior to the Senior Credit Termination, Holder shall not contest the validity, priority or perfection of the security interest in or other lien upon the Shared Collateral (regardless of whether the Senior Lender’s security interest in or lien upon the Shared Collateral is valid or perfected). The priorities of any liens or security interests of the parties in any property of the Company, Computex or any of its subsidiaries other than the Shared Collateral are not affected by this Section 3 and shall be determined by reference to applicable law. The Senior Lender’s rights under this Section 3 are in addition to, and not in substitution of, its rights under any other subordination agreement with Holder.

 

 

To the extent the Subordinated Indebtedness is ever secured by any Shared Collateral as of any date prior to the Senior Credit Termination, the relative rights of the Senior Lender and the Holder in or to any distributions from or in respect of any such Shared Collateral or proceeds of such Shared Collateral, including without limitation, with respect to any rights acquired by Holder under Sections 363 and 364 of the Bankruptcy Code (as defined herein) shall continue after the filing of such petition on the same basis as prior to the date of such filing. If any Insolvency Proceeding shall occur, the Holder shall file appropriate claims or proofs of claim in respect of this Debenture at least 30 days prior to the expiration of the period during which such claims or proofs of claims may be filed without the approval of the court or any third party. Upon the failure of the Holder to take such action, the Senior Lender is hereby irrevocably authorized and empowered (in its own name or otherwise), but shall have no obligation, to demand, sue for, collect and receive every payment or distribution referred to in respect of the Subordinated Indebtedness and to file claims and proofs of claim and take such other action as it may deem necessary or advisable for the exercise of enforcement of any of the rights or interests of Holder with respect to the Subordinated Indebtedness. If any of the Company, Computex or its subsidiaries shall become subject to an Insolvency Proceeding, (i) the Holder will not oppose the Senior Lender’s requests for adequate protection payments, post-petition interest, or for additional collateral or replacement liens or security interests in connection with any use of cash collateral or financing for a debtor-in-possession and (ii) the Holder will not seek or request adequate protection or adequate protection payments in any such proceeding. The Holder agrees that it will not object to or oppose a sale or other disposition of any assets included in the Shared Collateral securing the Senior Indebtedness (or any portion thereof) free and clear of liens, security interests or other claims under Section 363 of the Bankruptcy Code or any other provision of the Bankruptcy Code if the Senior Lender has consented to such sale or disposition of such assets and the Holder will be deemed to have (a) consented under Section 363 of the Bankruptcy Code (and otherwise) to any such sale or disposition supported by the Senior Lender and (b) concurrently with the closing of such sale, the Holder shall release its liens and security interests, if any, in such assets, property or interests consisting of Shared Collateral. The Holder shall not support or vote in favor of any plan of reorganization (and each shall be deemed to have voted to reject any plan of reorganization) unless such plan either (a) results in the Senior Indebtedness being paid in full, (b) is accepted by the Senior Lender or (c) incorporates this Section 3 by reference and continues the rights and priorities of the Senior Lender and the Holder in such Shared Collateral subsequent to the effective date of such plan. To the extent that the Holder has or acquires rights under Section 363 or Section 364 of the Bankruptcy Code with respect to any of the Shared Collateral, the Holder agrees not to assert any of such rights without the prior written consent of the Senior Lender; provided that if requested by the Senior Lender, the Holder shall timely exercise such rights in the manner reasonably requested by the Senior Lender, including any rights to payments in respect of such rights. The Holder acknowledges and agrees that the Senior Indebtedness and the Subordinated Indebtedness should be separately classified in any plan of reorganization proposed or adopted in any case under the Bankruptcy Code or any other proceeding (including, without limitation, for purposes of Section 1122 of the Bankruptcy Code). If any of the Company, Computex or its subsidiaries shall become subject to a case under the Bankruptcy Code, all proceeds of Shared Collateral shall be applied to the Senior Indebtedness until such Senior Indebtedness is paid in full before any distribution shall be made to the Holder; if any such distribution is received by the Holder, it shall be paid or delivered directly to the Senior Lender. Except as otherwise provided herein, in any case or proceeding under the Bankruptcy Code or any other insolvency, bankruptcy, receivership, liquidation (voluntary or involuntary), reorganization or other similar proceeding involving the Company, Computex, any of its subsidiaries or their respective properties (such case or proceeding referred to as an “Insolvency Proceeding”), the Holder may exercise its respective rights and remedies as an unsecured creditor only against the Senior Lender in accordance with applicable law; provided that the Holder shall not take any action that is, or would reasonably be expected to be, otherwise inconsistent with the terms of this Section 3. As used herein, the term “Bankruptcy Code” means the provisions of Title 11 of the United States Code, 11 U.S.C.§§101 et seq, as amended, and any successor statute.

 

 

Holder waives any duty on the part of the Senior Lender, and agrees that Holder is not relying upon nor expecting the Senior Lender, to disclose to Holder any fact now or later known by the Senior Lender, whether relating to the operations or condition of the Company, Computex or any of its subsidiaries, the existence, liabilities or financial condition of any guarantor of the Senior Indebtedness, the occurrence of any default with respect to the Senior Indebtedness or otherwise, notwithstanding any effect this fact may have upon Holder’s risk or Holder’s rights against such Person.

 

The Senior Lender, in its sole discretion, without notice to Holder, may release, exchange, enforce and otherwise deal with any security now or later held by the Senior Lender for payment of the Senior Indebtedness or release any party now or later liable for payment of the Senior Indebtedness without affecting in any manner the Senior Lender’s rights under this Section 3. Holder acknowledges and agrees that the Senior Lender has no obligation to acquire or perfect any lien on or security interest in any asset(s), whether realty or personalty, to secure payment of the Senior Indebtedness, and Holder is not relying upon assets in which the Senior Lender has or may have a lien or security interest for payment of the Senior Indebtedness.

 

Notwithstanding any prior revocation, termination, surrender, or discharge of the Senior Indebtedness in whole or in part, the effectiveness of this Section 3 shall automatically continue or be reinstated in the event that any payment received or credit given by the Senior Lender in respect of the Senior Indebtedness after such revocation, termination, surrender or discharge, as applicable, is returned, disgorged, or rescinded under any applicable state or federal law, including, without limitation, laws pertaining to bankruptcy or insolvency, in which case the subordination provisions in this Section 3 shall be enforceable against Holder as if the returned, disgorged, or rescinded payment or credit had not been received or given by the Senior Lender, and whether or not the Senior Lender relied upon this payment or credit or changed its position as a consequence of it. In the event of such continuation or reinstatement of the subordination provisions in this Section 3 as set forth in this paragraph, Holder agrees upon demand by the Senior Lender to execute and deliver to the Senior Lender those documents which the Senior Lender reasonably determines are appropriate to further evidence (in the public records or otherwise) such continuation or reinstatement, although the failure of Holder to do so shall not affect in any way the reinstatement or continuation.

 

 

Holder waives, to the extent not expressly prohibited by applicable law, any right to require the Senior Lender to: (a) proceed against any person or property; (b) give notice of the terms, time and place of any public or private sale of personal property security held from Company or any other Person, or otherwise comply with the provisions of Section 9.611 or 9.621 of the Texas or other applicable Uniform Commercial Code; or (c) pursue any other remedy in the Senior Lender’s power. Holder waives notice of acceptance of this Debenture and presentment, demand, protest, notice of protest, dishonor, notice of dishonor, notice of default, notice of intent to accelerate or demand payment or notice of acceleration of any Senior Indebtedness, any and all other notices to which Holder might otherwise be entitled, and diligence in collecting any Senior Indebtedness, and agrees that Senior Lender may, once or any number of times, modify the terms of any Senior Indebtedness, compromise, extend, increase, accelerate, renew or forbear to enforce payment of any or all Senior Indebtedness, or permit the Company, Computex and its subsidiaries to incur additional Senior Indebtedness, all without notice to Holder and without affecting in any manner the unconditional obligations of Holder under this Section 3.

 

4. Conversion.

 

4.1. Conversion Rights.

 

(a) Optional Conversion. The unpaid principal amount of this Debenture (together with all accrued but unpaid interest thereon) shall be convertible, in whole or in part, at the option of the Holder at any time prior to the payment in full of the principal amount of this Debenture (together with all accrued but unpaid interest thereon), into such number of shares of fully paid and non-assessable shares of Common Stock as is determined by dividing the principal amount of the Debenture so converted (together with all accrued but unpaid interest thereon) by the Conversion Price (the “Holder Conversion Right”).

 

(b) Mandatory Conversion. If a Triggering Event occurs and provided that (i) the Company is not in breach of its obligations under the Registration Rights Agreement and (ii) the shares of Common Stock into which this Debenture and the Other Debentures are then convertible may be freely resold by each Holder without restriction under applicable securities laws whether pursuant to an effective registration statement or otherwise, then the unpaid principal amount of this Debenture (together with all accrued but unpaid interest thereon) shall automatically be converted as of the 5:00 p.m. Atlanta time on the sixth (6^th) Trading Day (the “Mandatory Conversion Date”) following the delivery to the Holders of written notice of such Triggering Event accompanied by a reasonably detailed calculation substantiating the occurrence of such Triggering Event into such number of shares of fully paid and non-assessable shares of Common Stock as is determined by dividing the principal amount of the Debenture (together with all accrued but unpaid interest thereon) by the Conversion Price (a “Mandatory Conversion”).

 

 

4.2. Issuance of Certificates. The Holder Conversion Right may be exercised by the Holder by the surrender of this Debenture (or of any replacement Debenture issued hereunder) with the conversion notice attached hereto duly executed, at the principal office of the Company or the transfer agent of the Company. Conversion shall be deemed to have been effected on (a) in the case of the Holder Conversion Right, the date that such delivery of the Debenture and conversion notice is actually made, or (b) in the case of Mandatory Conversion, the Mandatory Conversion Date (as applicable, the “Conversion Date”). As promptly as practicable, and in any event within three (3) Trading Days, after a Conversion Date and the Company’s receipt of the Debenture being converted (and the conversion notice, if applicable) (such fifth Trading Day thereafter, the “Share Delivery Date”), the Company shall issue and deliver to the Holder a certificate or certificates for the number of full shares of Common Stock to which the Holder is entitled (or evidence of the issuance of such shares in book entry form) and a check or cash with respect to any fractional interest in a share of Common Stock as provided in Section 4.4. The Company shall not be obligated to issue Common Stock certificates in the name of any party other than the Holders of the respective Debentures, absent full compliance with the provisions of Section 7 hereof. The person in whose name the certificate or certificates for Common Stock are to be issued shall be deemed to have become a stockholder of record on the next succeeding day on which the transfer books are open, but the Conversion Price shall be that in effect on the Conversion Date. All rights with respect to the Debentures (or any portion thereof) that are converted pursuant to this Section 4, including the rights to receive interest and notices, shall terminate upon conversion pursuant to this Section 4.2. Upon conversion of only a portion of this Debenture, the Company shall issue and deliver to the Holder hereof, at the expense of the Company, a new Debenture covering the principal amount of this Debenture not converted, which new Debenture shall entitle the holder thereof to interest on the principal amount thereof to the same extent as if the unconverted portion of this Debenture had not been surrendered for conversion.

 

4.3. Reservation of Stock Issuable Upon Conversion. The Company covenants that, for so long as any Debentures remain outstanding, the Company will at all times have authorized and reserved for the purpose of issue upon exercise of the Holder Conversion Right or upon Mandatory Conversion, a sufficient number of shares of Common Stock to provide for the full exercise of the Holder Conversion Right or the conversion pursuant to Mandatory Conversion.

 

4.4. Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of this Debenture. In lieu of any fractional shares to which the Holder would otherwise be entitled, the Company shall pay cash equal to the product of such fraction multiplied by the fair value of one share of the Company’s Common Stock on the Conversion Date, which shall be the closing price of the Common Stock on the Conversion Date as reported on the principal trading market therefor or in the absence of any such closing price, as determined in good faith by the Board.

 

4.5. Adjustment of Conversion Price. The Conversion Price and the number and kind of securities which may be received upon the exercise of the Holder Conversion Right or the Company Conversion Right shall be subject to the adjustment from time to time upon the happening of certain events, as follows:

 

(a) Adjustment for Stock Splits and Combinations. If the Company shall at any time or from time to time after the date hereof effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased, and conversely, if the Company shall at any time or from time to time after the date hereof combine the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section 4.5(a) shall become effective at the close of business on the date the subdivision or combination becomes effective.

 

 

(b) Adjustment for Certain Dividends and Distributions. In the event the Company shall at any time or from time to time after the date hereof make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction:

 

(i) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and

 

(ii) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter such Conversion Price shall be adjusted pursuant to this Section 4.5(b) as of the time of actual payment of such dividends or distributions.

 

(c) Adjustments for Other Dividends and Distributions. In the event the Company at any time or from time to time after the date hereof shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company other than shares of Common Stock, then and in each such event provisions shall be made so that the holders of Debentures shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Company which they would have received had their Debentures been converted into Common Stock on such record date and had thereafter, during the period from the date of such event to and including the Conversion Date, retained such securities (together with any distributions payable thereon during such period) receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section 4.5 with respect to the rights of the holders of the Debentures.

 

(d) Adjustment for Reclassification, Exchange or Substitution. If the Common Stock issuable upon the conversion of the Debentures shall be changed into the same or different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation or sale of assets provided for in Section 4.5(e) below), then and in each such event the holder of each Debenture shall have the right thereafter to convert each Debenture into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change, as holders of the number of shares of Common Stock into which such Debenture might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein.

 

 

(e) Reorganization, Merger, Consolidation or Sale of Assets. If at any time or from time to time there shall be a capital reorganization of the Common Stock (other than a subdivision, combination, reclassification or exchange of shares provided for elsewhere in this Section 4.5) or a merger or consolidation of the Company with or into another corporation or entity, or the sale of all or substantially all of the Company’s properties and assets to any other person, then, as a part of such reorganization, merger, consolidation or sale, provision shall be made so that the holders of the Debentures shall thereafter be entitled to receive upon conversion of the Debentures, the number of shares of stock or other securities or property of the Company, or of the successor corporation resulting from such merger or consolidation or sale, to which a holder of Common Stock deliverable upon conversion would have been entitled on such capital reorganization, merger, consolidation, or sale. In any such case, appropriate adjustment shall be made in the application of the provisions of this Section 4.5 with respect to the rights of the holders of the Debentures after the reorganization, merger, consolidation or sale to the end that the provisions of this Section 4.5 (including adjustment of the Conversion Price then in effect and the number of shares receivable upon conversion of the Debentures) shall be applicable after that event as nearly equivalent as may be practicable.

 

(f) Adjustments for Dilutive Issuances.

 

(i) Special Definitions. For purposes of this Section 4.5(f), the following definitions shall apply:

 

(1) “Additional Shares of Common Stock” shall mean all shares of Common Stock issued (or, pursuant to Section 4.5(f)(ii), deemed to be issued) by the Company after the Original Issuance Date, other than (I) the following shares of Common Stock and (II) shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (clauses (I) and (II), collectively, “Exempted Securities”):

 

(I) securities issued pursuant to the conversion or exercise of Options or Convertible Securities issued or outstanding on or prior to the Original Issuance Date (so long as the conversion or exercise prices of such securities are not amended to lower such price and/or adversely affect the Holder);

 

(II) the Other Debentures, the Warrants (as such term is defined in the Purchase Agreement) and any additional debentures or other securities issued as payment of interest on the Debentures;

 

(III) shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on shares of Common Stock that is covered by Section 4.5(a) through Section 4.5(e);

 

(IV) shares of Common Stock or Options issued to employees or directors of, or consultants or advisors to, the Company or any of its subsidiaries pursuant to a plan, agreement or arrangement approved by the Board and the holders of the Common Stock;

 

 

(V) shares of Common Stock or Convertible Securities actually issued upon the exercise of Options that were issued in compliance with Section 4.5(f) or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities that were issued in compliance with Section 4.5(f), in each case, provided such issuance is pursuant to the terms of such Option or Convertible Security;

 

(VI) shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions, or to real property lessors, as a customary “equity sweetener” pursuant to a bona fide debt financing, equipment leasing or real property leasing transaction approved by the Board; and

 

(VII) shares of Common Stock, Options or Convertible Securities issued pursuant to an acquisition of another corporation or other business by the Company or any of its subsidiaries by merger, purchase of substantially all of the assets or other reorganization or to a joint venture agreement, contribution agreement or similar arrangement, provided that such issuances are approved by the Board.

 

(2) “Common Stock Deemed Outstanding” means, at any given time, the number of shares of Common Stock actually outstanding at such time, plus the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any Options or Convertible Securities then outstanding, regardless of whether the Options or Convertible Securities are actually exercisable, convertible or exchangeable at such time.

 

(3) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

 

(4) “Option” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities.

 

(ii) Deemed Issue of Additional Shares of Common Stock.

 

(A) If the Company at any time or from time to time after the Original Issuance Date shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

 

(B) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price pursuant to the terms of Section 4.5(f)(iii), are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Company upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this Section 4.5(f)(ii)(B) shall have the effect of increasing the Conversion Price to an amount which exceeds the lower of (i) the Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) the Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

 

(C) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities which are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price pursuant to the terms of Section 4.5(f)(iii) (either because the consideration per share (determined pursuant to Section 4.5(f)(iv)) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price then in effect, or because such Option or Convertible Security was issued before the Original Issuance Date), are revised after the Original Issuance Date as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security to provide for either (1) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any decrease in the consideration payable to the Company upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Section 4.5(f)(ii)(1) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

 

(D) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price pursuant to the terms of Section 4.5(f)(iii), the Conversion Price shall be readjusted to such Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

 

(E) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Company upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price provided for in this Section 4.5(f)(ii) shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (B) and (C) of this Section 4.5(f)(ii)).  If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Company upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the Conversion Price that would result under the terms of this Section 4.5(f)(ii) at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

 

(iii) Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock.  In the event the Company shall, at any time after the Original Issuance Date and for so long as this Debenture remains outstanding, issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 4.5(f)(ii)), without consideration or for a consideration per share (the “New Issuance Price”) less than the applicable Conversion Price (the “Applicable Price”) in effect immediately prior to such issue (each, a “Dilutive Issuance”), then the Conversion Price shall be reduced, concurrently with such issue, to an amount equal to the lowest price per share at which such share of Common Stock has been issued or sold (or is deemed to have been issued or sold, in the case of Additional Shares of Common Stock deemed to be issued pursuant to Section 4.5(f)(ii)) pursuant to the Dilutive Issuance; provided, that if such issuance or sale (or deemed issuance or sale) was without consideration, then the Company shall be deemed to have received an aggregate of $0.001 of consideration for all such shares so issued or deemed to be issued.

 

(iv) Determination of Consideration.  For purposes of this Section 4.5(f)(iv), the consideration received by the Company for the issue of any Additional Shares of Common Stock shall be computed as follows:

 

(A) Cash and Property. Such consideration shall:

 

(I) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Company, excluding amounts paid or payable for accrued interest;

 

(II) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board; and

 

(III) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Company for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (I) and (II) above, as determined in good faith by the Board and the Holders of a majority in outstanding principal amount of the Debentures held by Ribbon Communications Inc. and/or its affiliates.

 

 

(B) Options and Convertible Securities.  The consideration per share received by the Company for Additional Shares of Common Stock deemed to have been issued pursuant to Section 4.5(f)(ii), relating to Options and Convertible Securities, shall be determined by dividing:

 

(I) the total amount, if any, received or receivable by the Company as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Company upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

 

(II) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

(v) Multiple Closing Dates.  In the event the Company shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price pursuant to the terms of Section 4.5(f)(iii), then, upon the final such issuance, the Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period).

 

(g) Minimum Adjustment. No adjustment of the Conversion Price, however, shall be made in an amount less than one cent, but any such lesser adjustment shall be carried forward and shall be made at the time and together with the next subsequent adjustment which together with any adjustments so carried forward shall amount to one cent or more.

 

(h) Certificate of Adjustment. Upon the occurrence of each adjustment or readjustment of the applicable Conversion Price pursuant to this Section 4.5, the Company shall promptly compute such adjustment or readjustment in accordance with the terms hereof and prepare and furnish to each holder of Debentures a certificate, signed by an officer of the Company, setting forth such adjustment or readjustment and showing in reasonable detail the facts upon which such adjustment or readjustment is based.

 

 

(i) Notices of Record Date. If:

 

(i) the Company shall set a record date for the purpose of entitling the holders of its shares of Common Stock to receive a dividend, or any other distribution, payable otherwise than in cash;

 

(ii) the Company shall set a record date for the purpose of entitling the holders of its shares of Common Stock to subscribe for or purchase any shares of any class or to receive any other rights;

 

(iii) there shall occur any capital reorganization of the Company, reclassification of the shares of the Company (other than a subdivision or combination of its outstanding Common Stock), consolidation or merger of the Company with or into another corporation, or conveyance of all or substantially all of the assets of the Company to another corporation; or

 

(iv) there shall occur a voluntary or involuntary dissolution, liquidation, or winding up of the Company;

 

then, and in any such case, the Company shall cause to be sent to the holders of record of the outstanding Debentures, at least ten Trading Days prior to the dates hereinafter specified, a written notice stating the date (x) which has been set as the record date for the purpose of such dividend, distribution, or rights, or (y) on which such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation, or winding up is to take place and the record date as of which holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation, or winding up.

 

4.6 Limitations on Number of Shares Issuable. Notwithstanding anything herein to the contrary, provided that the Common Stock remains listed for trading on the Nasdaq Stock Market or other national securities exchange, the aggregate number of shares of Common Stock issued upon conversion of the Debentures, together with the aggregate number of shares of Common Stock issued upon exercise of the Warrants, shall not exceed 19.9% of either (a) the total number of shares of Common Stock outstanding on the date hereof or (b) the total voting power of the Company’s securities outstanding on the date hereof that are entitled to vote on a matter being voted on by holders of the Common Stock, unless and until the Company has obtained the Stockholder Approval [(as such term is defined in the Securities Purchase Agreement)].

 

4.7 Registration, Exchange and Transfer. The Company will keep a register in which, subject to such reasonable regulations as it may prescribe, it will register all Debentures. No transfer of this Debenture shall be valid as against the Company unless made upon such register. This Debenture is subject to the restrictions on transfer set forth on the face hereof. Upon surrender for transfer of this Debenture and compliance with said restrictions on transfer, the Company shall execute and deliver in the name of the transferee or transferees a new Debenture or Debentures for a like principal amount.

 

This Debenture, if presented for transfer, exchange, redemption or payment, shall (if so required by the Company) be duly endorsed by, or be accompanied by instruments of transfer in form satisfactory to the Company duly executed by, the registered Holder or by his duly authorized attorney.

 

 

Any exchange or transfer shall be without charge, except that the Company may require payment of the sum sufficient to cover any processing cost, tax or governmental charge that may be imposed in relation thereto.

 

The Company may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Debenture shall be overdue and notwithstanding any notation of ownership or other writing hereon by anyone other than the Company), for the purpose of receiving payment of or on account of the principal hereof and interest hereon, for the conversion hereof and for all other purposes, and the Company shall not be affected by any notice to the contrary.

 

5. Events of Default.

 

5.1. Definitions and Effect. In case one or more of the following “Events of Default” shall have occurred and be continuing:

 

(i) default in the payment of any amount due under this Debenture;

 

(ii) default in the performance of any covenant or agreement contained in this Debenture (other than as set forth in clause (i) of this Section 5.1), the Purchase Agreement, the Warrants, the Voting Agreement, the [NCP Subscription Agreement] or the Investor Rights Agreement (as such term is defined in the Purchase Agreement) and such default is not fully cured within 15 days after the occurrence thereof;

 

(iii) any representation or warranty made by the Company in the Purchase Agreement shall prove to have been false or incorrect or breached in a material respect on the date as of which made or as of the Closing Date (as defined in the Purchase Agreement);

 

(iv) the Company shall have admitted in writing its inability to pay its debts as they mature, or shall have made an assignment for the benefit of creditors, or shall have been adjudicated bankrupt;

 

(v) a trustee or receiver of the Company, or of any substantial part of the assets of the Company, shall have been appointed and, if appointed in a proceeding brought against the Company, the Company by any action or failure to act shall have indicated its approval of, consent to or acquiescence in such appointment, or, within 60 days after such appointment, such appointment shall not have been vacated, or stayed on appeal or otherwise, or shall not otherwise have ceased to continue in effect;

 

(vi) proceedings involving the Company shall have been commenced by or against the Company under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law or statute of the federal government, or any state government, or any non-US government, and, if such proceedings shall have been instituted against the Company, or the Company by any action or failure to act shall have indicated its approval of, consent to, or acquiescence therein, or an order shall have been entered approving the petition in such proceedings, and within 60 days after the entry thereof, such order shall not have been vacated or stayed on appeal or otherwise, or shall not otherwise have ceased to continue in effect; or

 

(vii) one or more judgments for the payment of money in an aggregate amount in excess of $1,000,000 shall be rendered against the Company and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, which judgments are not stayed on appeal or otherwise being appropriately contested in good faith by proper proceedings diligently pursued.

 

 

then and in each and every such case, the holders of a majority in aggregate principal amount of then-outstanding Debentures held by Ribbon Communications Inc. and/or its affiliates may declare the principal and accrued but unpaid interest of all such Debentures to be due and payable immediately, by written notice to the Company, and upon any such declaration the same shall become and shall be immediately due and payable, subject to the subordination provisions of Section 3 hereof. At any time after such declaration of acceleration has been made, and before a judgment or decree for payment of money due has been obtained, the holders of a majority in aggregate principal amount of the then-outstanding Debentures held by Ribbon Communications Inc. and/or its affiliates may, by written notice to the Company, rescind and annul such declaration. From and after the occurrence, and during the continuance, of the any Event of Default, irrespective of any declaration of maturity or default, all amounts remaining unpaid or thereafter accruing under this Debenture shall bear interest at a rate equal to the Default Rate. Such Default Rate shall also be charged on the amounts owed by the Company to Holder pursuant to any judgments entered in favor of Holder with respect to this Debenture.

 

5.2. Waiver. At any time before the date of any declaration accelerating the maturity of this Debenture, the holders of a majority in aggregate principal amount of then-outstanding Debentures held by Ribbon Communications Inc. and/or its affiliates may waive any Event of Default hereunder. Such waivers shall be evidenced by written notice or other document specifying the Event(s) of Default being waived and shall be binding on all existing or subsequent holders of such Debentures.

 

6. Prepayment. Notwithstanding anything set forth herein, the Company shall have the right to prepay the then-outstanding principal amount of this Debenture in whole but not in part (unless as to prepayment in part the Holders of a majority in principal amount of the Debentures held by Ribbon Communications Inc. and/or its affiliates consents otherwise), together with any accrued but unpaid interest thereon. To exercise such right, the Company shall give notice in writing of its election to prepay the Debentures to the holders of record of the Debentures to be prepaid, addressed to them at their respective addresses appearing on the books of the Company. In such notice, the Company shall designate a date for the prepayment not less than 30 days following the date of the notice. Prior to the date of prepayment specified in the notice, a Holder may elect to exercise the Holder Conversion Right.

 

 

7. Restrictions on Transfer.

 

7.1. Restricted Securities. By acceptance hereof, the Holder understands and agrees that this Debenture and the Common Stock receivable upon conversion hereof are characterized as “restricted securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances. In this connection, the Holder represents that it is familiar with Rule 144 promulgated by the Securities and Exchange Commission, as presently in effect, and understands the resale limitations imposed thereby and by the Securities Act. In addition, the Holder understands and agrees that this Debenture is subject to the additional restrictions on transfer set forth in the legend appearing at the top of the first page of this Debenture.

 

7.2. Further Limitations on Disposition. Without in any way limiting the representations set forth above, the Holder further agrees not to make any disposition of all or any portion of this Debenture (or of Common Stock issuable upon conversion thereof) except in compliance with applicable state securities laws and unless and until:

 

(a) there is then in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in accordance with such registration statement;

 

(b) such disposition is made in accordance with Rule 144 under the Securities Act; or

 

(c) the Holder shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, and, if requested by the Company, the Holder shall have furnished the Company with an opinion of counsel, which opinion and counsel shall be reasonably satisfactory to the Company, that such disposition will not require registration under the Securities Act and will be in compliance with applicable state securities laws.

 

Notwithstanding anything contained herein to the contrary, Ribbon Communications Inc. shall have the right to elect to have a portion of the Debentures held by it redeemed by the Company pursuant to the Investor Rights Agreement.

 

7.3. Legends. It is understood that each Debenture and each certificate evidencing Common Stock acquired upon conversion thereof (or evidencing any other securities issued with respect thereto pursuant to any stock split, stock dividend, merger or other form of reorganization or recapitalization) shall bear the following legend (in addition to any legends which may be required in the opinion of the Company’s counsel by applicable state or federal laws):

 

[THIS DEBENTURE / THE SECURITIES REPRESENTED BY THIS CERTIFICATE] HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE COMPANY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED, EXCEPT (A) AS SET FORTH IN SECTION 7.2 OF THE DEBENTURE AND (B) AS COLLATERAL TO THE LENDERS TO HOLDER(S) HEREOF).

 

 

8. Notices.

 

8.1. Notices to Holder of Debentures. Any notice required by the provisions of this Debenture to be given to the holders of Debentures shall be in writing and may be delivered by any means (including personal delivery, expedited courier, messenger service, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient.

 

8.2. Notices to the Company. Whenever any provision of this Debenture requires a notice to be given to the Company by the holder of any Debenture, the holder of Common Stock obtained upon the conversion of a Debenture or the holder of any other security of the Company obtained in connection with a recapitalization, merger, dividend or other event affecting a Debenture, then and in each such case, such notice shall be in writing and may be delivered by any means (including personal delivery, expedited courier, messenger service, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication will be deemed to have been duly given unless and until it actually is received by the Company.

 

9. No Rights as Stockholder. This Debenture, as such, shall not entitle the Holder to any voting rights or other rights as a stockholder of the Company.

 

10. Headings and Governing Law. The descriptive headings in this Debenture are inserted for convenience only and do not constitute a part of this Debenture. The validity, meaning and effect of this Debenture shall be determined in accordance with the laws of the State of Delaware without giving effect to principles of conflict of laws that would cause the laws of another jurisdiction to apply.

 

11. Severability. Whenever possible, each provision hereof shall be interpreted in a manner as to be effective and valid under applicable law, but if any provision hereof is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating or otherwise adversely affecting the remaining provisions hereof. If a court of competent jurisdiction should determine that a provision hereof would be valid or enforceable if a period of time were extended or shortened or a particular percentage were increased or decreased, then such court may make such change as shall be necessary to render the provision in question effective and valid under application law.

 

12. Amendment. With the consent of the holders of a majority in aggregate principal amount of the then-outstanding Debentures held by Ribbon Communications Inc. and/or its affiliates, the Company may amend this Debenture for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, the Debentures; provided, however, that no such amendment shall, without the consent of the holder of each outstanding Debenture affected thereby:

 

 

(a) change: (i) the maturity of the principal of, or any installment of interest on, any Debenture; or (ii) the coin or currency in which the principal of or interest on any Debenture is payable;

 

(b) reduce the principal amount thereof or the interest rate thereon;

 

(c) increase the Conversion Price thereof;

 

(d) reduce the percentage in principal amount of the outstanding Debentures the consent of whose holders is required for any amendment or waiver as provided for in the Debentures’ or

 

(e) amend, modify or waive this Section 12.

 

Prompt written notice that this Debenture has been amended in accordance with the terms of this Section shall be given to each holder of a Debenture. Upon such amendment, the Debentures shall be deemed modified in accordance therewith, such amendment shall form a part of this Debenture for all purposes, and every subsequent holder of Debentures shall be bound thereby.

 

Notwithstanding anything to the contrary contained herein, each of the Company and the Holder agrees, confirms and acknowledges that (i) the Senior Lender is an obligee and third-party beneficiary under Section 3 of this Debenture and has the right to enforce such provisions as if the Senior Lender were an original party hereto and (ii) until the Senior Credit Termination, no amendments, modifications, supplements, waivers or consents to the subordination provisions in Section 3 adverse to the Senior Lender will be effective without the consent of the Senior Lender.

 

13. Remedies. Holder shall have, in addition to the rights and remedies contained in this Debenture, all of the rights and remedies of a creditor, now or hereafter available at law or in equity. Holder may, at its option, exercise any one or more of such rights and remedies individually, partially, or in any combination from time to time, including, to the extent applicable, before the occurrence of an Event of Default. No right, power, or remedy conferred upon Holder shall be exclusive of any other right, power, or remedy referred to herein or now or hereafter available at law or in equity. In addition to all other amounts payable upon and Event of Default, the Company shall reimburse Holder for all of its out of pocket expenses, including reasonable legal fees) incurred in the enforcement of Holder’s rights and remedies in respect of this Debenture.

 

14. Guarantee. At the Initial Closing, the Company shall cause AVCTechnologies USA, Inc., American Virtual Cloud Technologies Ireland Limited, Computex and each of its subsidiaries to execute a guaranty of this Debenture substantially in the form attached as Exhibit A hereto.

 

15. Loss or Destruction of Debenture. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Debenture, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Debenture, if mutilated, the Company will execute and deliver a new Debenture of like tenor and date. Any such new Debenture executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Debenture so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone.

 

[Remainder of page intentionally left blank; signature page follows.]

 

 

IN WITNESS WHEREOF, AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC. has duly caused this Debenture to be signed in its name and on its behalf by its duly authorized officer as of the date first above written.

 

	AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC.
	By:
		Name:
		Title:

 

Agreed to and accepted as of the date first written above:

 

HOLDER
By:
Name:
Title:

 

 

NOTICE OF CONVERSION

 

(to be signed upon conversion of the Debenture)

 

TO AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC.:

 

The undersigned, the holder of the foregoing Debenture, hereby surrenders such Debenture for conversion into ______ shares of the common stock of American Virtual Cloud Technologies, Inc., and requests that the certificates for such shares be issued in the name of, and delivered to, ________________________________________, whose address is __________________________________________________.

 

Dated: _____________________

 

____________________________

(signature)

 

____________________________

(address)

 

 

EXHIBIT A

 

FORM OF GUARANTY

 

TO BE DELIVERED BY COMPUTEX AND SUBSIDIARIES, AVCTECHNOLOGIES USA, INC. AND AMERICAN VIRTUAL CLOUD TECHNOLOGIES IRELAND LIMITED

 

THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN SECTION 3 OF THE DEBENTURES (AS DEFINED HEREIN) TO THE SENIOR INDEBTEDNESS (AS DEFINED IN THE DEBENTURES), AND EACH HOLDER OF THIS GUARANTY, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF SECTIONS 3 AND 12 OF THE DEBENTURES.

 

THIS GUARANTY (this “Guaranty”), dated as of ______________, 2020, between entities named as guarantors on the signature pages this Guaranty _____________ (the “Guarantors” and each a “Guarantor”), each of which Guarantors is a subsidiary of American Virtual Cloud Technologies, Inc., a Delaware corporation (the “Company”).

 

W I T N E S S E T H

 

WHEREAS, the Company and has heretofore executed and delivered to the Holders one or more Convertible Debentures dated the date hereof in an aggregate principal amount of $__________ and may thereafter execute and deliver additional Convertible Debentures in an additional aggregate principal amount not to exceed $___________ (the “Debentures”);

 

WHEREAS, Section 14 of the Debentures provides that the Guarantors shall execute and deliver to each Holder a Guaranty pursuant to which the Guarantors shall unconditionally guarantee all of the Company’s obligations under the Debentures on the terms and conditions set forth herein (the “Debenture Guarantee”); and

 

WHEREAS, the Guarantors are authorized to execute and deliver this Guaranty.

 

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, including the benefits to be received by the Guarantors from the financing provided by the issuance of the Debentures and the other securities issued contemporaneously therewith, the receipt of which is hereby acknowledged, each Guarantor and the Company mutually covenant and agree for the equal and ratable benefit of the Holders of the Debentures as follows:

 

1. DEFINED TERMS. Capitalized terms used but not defined herein shall have the meanings given to them in the Debentures or the Purchase Agreement, as applicable.

 

2. AGREEMENT TO GUARANTEE.

 

(a) Each Guarantor hereby agrees, jointly and severally with all other Guarantors hereby, guarantees, to each Holder of a Debenture, irrespective of the validity and enforceability of the Debentures or the obligations of the Company hereunder or thereunder, that:

 

 

(1) the principal of, premium, if any, and interest on, the Debentures will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Debentures, if any, if lawful, and all other obligations of the Company to the Holders thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and

 

(2) in case of any extension of time of payment or renewal of any Debentures or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.

 

Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.

 

(b) The Guarantors hereby agree that their obligations hereunder are unconditional, irrespective of the validity, regularity or enforceability of the Debentures, the absence of any action to enforce the same, any waiver or consent by any Holder of the Debentures with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Guarantee will not be discharged except by complete performance of the obligations contained in the Debentures.

 

(c) If any Holder is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.

 

(d) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in the Debentures for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any such declaration of acceleration of such obligations, such obligations (whether or not due and payable) will forthwith become due and payable by the Guarantors for the purpose of this Guarantee. The Guarantors will have the right to seek contribution from any other Guarantor, or the Company, as the case may be, so long as the exercise of such right does not impair the rights of the Holders under the Debenture Guarantee.

 

 

(e) Each Guarantor, and by its acceptance of Debentures, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of bankruptcy law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Guarantee. To effectuate the foregoing intention, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor shall be limited to the maximum amount that shall, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Guaranty, result in the obligations of such Guarantor under its Guaranty not constituting a fraudulent transfer or conveyance.

 

3. NOTICES. All notices or other communications to each Guarantor shall be given as provided in Section 8.2 of the Debentures.

 

4. RATIFICATION OF DEBENTURES; GUARANTIES PART OF DEBENTURES. Except as expressly amended hereby, the Debentures are in all respects ratified and confirmed and all the terms, conditions and provisions thereof (including, without limitation, the terms and provisions of Section 3 of the Debentures in favor of the Senior Lender as defined therein) shall remain in full force and effect. This Guaranty shall form a part of the Debentures for all purposes, and every holder of Debentures heretofore or hereafter authenticated and delivered shall be bound hereby.

 

5. GOVERNING LAW. THIS GUARANTY AND THE DEBENTURES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, with the laws of the State of Delaware without giving effect to principles of conflict of laws that would cause the laws of another jurisdiction to apply.

 

6. COUNTERPARTS. The parties may sign any number of copies of this Guaranty. Each signed copy shall be an original, but all of them together represent the same agreement.

 

7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.

 

IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly executed and attested, all as of the date first above written.

 

Dated:                 , 20

 

[GUARANTOR]

 

By:
Name:
Title:

 

 

EXHIBIT B

 

FORM OF JOINDER

 

THIS JOINDER to the Convertible Debenture, dated as of __________, 2020 (the “Debenture”), issued by American Virtual Cloud Technologies, Inc., a Delaware corporation (the “Company”), to _______________ ( “Original Holder”), is executed and delivered as of the date below by ______________ ( “New Holder”). Capitalized terms used herein but not otherwise defined shall have the meanings set forth in the Debenture.

 

WHEREAS, on the date hereof, Original Holder has assigned to New Holder all of the Original Holder’s rights under the Debenture, and the Debenture requires New Holder, as a transferee of the Debenture, to execute a joinder to the Debenture.

 

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, New Holder hereby agrees as follows:

 

1. Agreement to be Bound. New Holder hereby (a) acknowledges that New Holder has received and reviewed a complete copy of the Debenture and (b) agrees that upon execution of this Joinder, New Holder shall be fully bound by, and subject to, all of the covenants, terms and conditions of the Debenture applicable to the Holder thereof (including, without limitation, the provisions of Sections 3 and 12 thereof), as though an original party thereto.

 

2. Successors and Assigns. Except as otherwise provided herein, this Joinder shall bind and inure to the benefit of and be enforceable by the Company and its successors, heirs and assigns.

 

3. Headings and Governing Law

 

. The descriptive headings in this Joinder are inserted for convenience only and do not constitute a part of this Joinder. The validity, meaning and effect of this Joinder shall be determined in accordance with the laws of the State of Delaware without giving effect to principles of conflict of laws that would cause the laws of another jurisdiction to apply.

 

IN WITNESS WHEREOF, the undersigned has executed this Joinder as of the date set forth below.

 

By:
Name:
Title:
Date:

 

 

28

Exhibit 4.2

 

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED (EXCEPT THAT NOTWITHSTANDING THE FOREGOING, THIS warrant MAY BE PLEDGED AS COLLATERAL TO THE LENDERS TO HOLDER(S) hereof).

 

WARRANT TO PURCHASE COMMON STOCK
OF
AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC.

 

No. A1-__

______ Shares of Common Stock

 

This is to Certify That, FOR VALUE RECEIVED, ______________________, or its assigns (“Holder”), is entitled to purchase, subject to the provisions of this Warrant, from American Virtual Cloud Technologies, Inc., a Delaware corporation (the “Company”), _______ shares of fully paid, validly issued and nonassessable shares of the common stock of the Company (“Common Stock”) at an exercise price of $0.01 per share. The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time pursuant to Section (h) hereof or as otherwise provided herein, are hereinafter sometimes referred to as “Warrant Shares” and the exercise price per share of Common Stock acquirable upon exercise hereof as in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the “Exercise Price.”

 

This Warrant to Purchase Common Stock (this “Warrant”) is being issued pursuant to that certain [Securities Purchase Agreement, dated as of December 1, 2020, to which the Company and the Holder are parties / Amended and Restated Purchase Agreement, dated as of December 1, 2020, among the Holder, Ribbon Communications Operating Company, Inc., Ribbon Communications International Limited and the Company] (the “Purchase Agreement”). Capitalized terms used but not defined herein shall have the meanings given to them in the Purchase Agreement.

 

 

(a) EXERCISE OF WARRANT.

 

(1) This Warrant may be exercised in whole or in part at any time or from time to time from the date hereof up to and including December 1, 2025 (the “Exercise Period”); provided, however, that (A) if such day is a day on which banking institutions in the State of Georgia, New York or Texas are authorized by law to close, then on the next succeeding day which shall not be such a day, and (B) in the event of any merger, consolidation or sale or disposition of all or substantially all the assets of the Company as an entirety, resulting in any distribution to the Company’s stockholders, prior to termination of the Exercise Period, or any reclassification, recapitalization, reorganization, business combination or similar transaction (each of the foregoing, a “Major Transaction”), the Holder shall have the right to exercise this Warrant commencing at such time through the termination of the Exercise Period into the kind and amount of shares of stock and other securities and property (including cash) receivable had the Holder exercised this Warrant immediately prior to such Major Transaction or any record date established to determine the receipt of any payment or distribution in respect thereof. This Warrant may be exercised by presentation and surrender hereof to the Company at its principal office with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form. As soon as practicable after each such exercise of this Warrant, but not later than three (3) business days following the receipt of good and available funds, the Company shall issue and deliver to the Holder a certificate or certificates for the Warrant Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares purchasable hereunder. As of the end of business on the date of receipt by the Company of this Warrant at its office in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock or other property issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares or other property shall not then be physically delivered to the Holder.

 

(2) At any time during the Exercise Period, the Holder may, at its option, exercise this Warrant on a cashless basis by exchanging this Warrant, in whole or in part (a “Warrant Exchange”), into the number of Warrant Shares determined in accordance with this Section (a)(2), by surrendering this Warrant at the principal office of the Company or at the office of its stock transfer agent, accompanied by a notice stating such Holder’s intent to effect such exchange, the number of Warrant Shares to be exchanged and the date on which the Holder requests that such Warrant Exchange occur (the “Notice of Exchange”). The Warrant Exchange shall take place on the date specified in the Notice of Exchange or, if later, the date the Notice of Exchange is received by the Company (the “Exchange Date”). Certificates for the shares issuable upon such Warrant Exchange and, if this Warrant should be exercised in part only, a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares purchasable hereunder, shall be issued as of the Exchange Date and delivered to the Holder within seven (7) days following the Exchange Date. In connection with any Warrant Exchange, this Warrant shall represent the right to subscribe for and acquire the number of Warrant Shares equal to (i) the number of Warrant Shares specified by the Holder in its Notice of Exchange (the “Total Number”) less (ii) the number of Warrant Shares equal to the quotient obtained by dividing (A) the product of the Total Number and the existing Exercise Price by (B) Fair Market Value of a share of Common Stock. “Fair Market Value” shall equal the average closing trading price of the Common Stock as reported on the relevant market or exchange (or, if not then traded on a market or exchange but listed for quotation on the over-the-counter bulletin board, on the over-the-counter bulletin board) for the five (5) trading days immediately preceding the date of the Notice of Exchange or, if the Common Stock is not listed or admitted to trading on any market or exchange or listed for quotation on the over-the-counter bulletin board, and the average price cannot be determined as contemplated above, the Fair Market Value of the Common Stock shall be as reasonably determined in good faith by the Company’s Board of Directors with the concurrence of the Holder.

 

 

(b) REPRESENTATIONS OF HOLDER. The Holder (i) is an “accredited investor,” as defined in Rule 501 promulgated under the Securities Act of 1933, as amended (the “1933 Act”), (ii) understands the risks of, and other considerations relating to, a purchase of this Warrant, (iii) understands that the Warrants and/or the Warrant Shares may not be sold, transferred, hypothecated or pledged, except pursuant to an effective registration statement under the 1933 Act and under any applicable state securities law, or pursuant to an available exemption from the registration requirements of the 1933 Act and any applicable state securities laws, in all cases established to the satisfaction of the Company (except that notwithstanding the foregoing, this Warrant may be pledged as collateral to the lenders to the Holder(s) hereof), and (v) the Holder has been given the opportunity to obtain such additional information that it believes is necessary.

 

(c) RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of the this Warrant such number of shares of Common Stock as shall be required for issuance and delivery upon exercise of this Warrant.

 

(d) LIMITATIONS ON NUMBER OF SHARES ISSUABLE. Notwithstanding anything herein to the contrary, the aggregate number of shares of Common Stock issued upon conversion of the Warrants, together with the aggregate number of shares of Common Stock issued upon exercise of the Debentures, shall not exceed 19.9% of either (i) the total number of shares of Common Stock outstanding on the date hereof or (ii) the total voting power of the Company’s securities outstanding on the date hereof that are entitled to vote on a matter being voted on by holders of the Common Stock, unless and until the Company has obtained the Stockholder Approval.

 

(e) FRACTIONAL SHARES. No fractional shares or strips representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the Fair Market Value of a share of Common Stock.

 

(f) LOSS OR DESTRUCTION OF WARRANT. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone.

 

 

(g) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a shareholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in this Warrant and are not enforceable against the Company except to the extent set forth herein.

 

(h) ANTI-DILUTION PROVISIONS. In case the Company shall hereafter (i) declare a dividend or make a distribution on its outstanding Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action. The number of shares of Common Stock that the Holder shall thereafter, on the exercise hereof, be entitled to receive shall be adjusted to a number determined by multiplying the number of shares of Common Stock that would otherwise (but for the provisions of this Section (h)) be issuable on such exercise by a fraction of which (i) the numerator is the Exercise Price that would otherwise (but for the provisions of this Section (h)) be in effect, and (ii) the denominator is the Exercise Price in effect on the date of such exercise (taking into account the provisions of this Section (h)). Notwithstanding the foregoing, in no event shall the Exercise Price be less than the par value of the Common Stock. Adjustment pursuant to this Section shall be made successively whenever any event listed above shall occur. In the event the Company shall hereafter declare a dividend or make a distribution on its outstanding Common Stock in securities of the Company other than shares of Common Stock, then and in each such event provisions shall be made so that the holders of Warrants shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Company which they would have received had their Warrants been converted into Common Stock on such record date and had thereafter, during the period from the date of such event to and including the Exchange Date, retained such securities (together with any distributions payable thereon during such period) receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this Section (h) with respect to the rights of the holders of the Warrants.

 

 

(i) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon the Common Stock or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed to the Holder, at least twenty days prior the earlier of the dates specified in (x) and (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up.

 

(j) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any reclassification, capital reorganization or other change of outstanding Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation (other than a merger with a subsidiary in which merger the Company is the continuing corporation or a merger in which the Common Stock of the Company outstanding immediately prior thereto represents immediately thereafter (either by remaining outstanding or by being converted into voting securities of the surviving or acquiring entity) 50% or more of the combined voting power and economic interests in the Company or such surviving or acquiring entity outstanding immediately after such transaction and economic interests in the Company or such surviving or acquiring entity outstanding immediately after such transaction and which does not result in any reclassification, capital reorganization or other change of outstanding Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company in the entirety (a “Reorganization”), the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant at any time prior to the expiration of the Warrant, to purchase or receive the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock that might have been purchased or received upon exercise of this Warrant immediately prior to such Reorganization. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section (i) shall similarly apply to successive reclassifications, capital reorganizations and changes of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Section (h) hereof.

 

 

(k) NO NET-CASH SETTLEMENT. Except as expressly provided herein, in no event will the Holder be entitled to receive a net-cash settlement or other consideration in lieu of physical settlement in securities.

 

(l) MODIFICATION OF AGREEMENT. The provisions of this Warrant may from time to time be amended, modified or waived, by the Company and the holder of this Warrant.

 

(m) TRANSFER OF WARRANT. This Warrant shall inure to the benefit of the successors to and assigns of the Holder; provided, however, this Warrant may not be pledged, sold, assigned or otherwise transferred, directly or indirectly, by operation of law, change of control, or otherwise, except in compliance with applicable registration requirements of securities laws or an available exemption therefrom (except that notwithstanding the foregoing, this Warrant may be pledged as collateral to the lenders to the Holder(s) hereof). This Warrant and all rights hereunder are registrable at the office or agency of the Company referred to below by the Holder in person or by its duly authorized attorney, upon surrender of this Warrant properly endorsed accompanied by an assignment form in a form approved by the Company, duly executed by the transferring Holder and the transferee.

 

(n) REGISTER OF WARRANTS. The Company shall maintain, at the principal office of the Company (or such other office as it may designate by notice to the Holder), a register in which the Company shall record the name and address of the person in whose name this Warrant has been issued, as well as the name and address of each successor and prior owner of such Warrant. The Company shall be entitled to treat the Person in whose name this Warrant is so registered as the sole and absolute owner of this Warrant for all purposes.

 

(o) WARRANT AGENT. The Company may, by written notice to the Holder, appoint the transfer agent and registrar for the Common Stock as the Company’s agent for the purpose of issuing Common Stock (or other securities) on the exercise of this Warrant pursuant to paragraph(a), and the Company may, by written notice to the Holder, appoint an agent having an office in the United States of America for the purpose of replacing this Warrant pursuant to paragraph (e), or any of the foregoing, and thereafter any such replacement shall be made at such office by such agent.

 

(p) NOTICES, ETC. All notices and other communications from the Company to the Holder shall be mailed by first class certified mail, postage prepaid, at such address as may have been furnished to the Company in writing by the Holder or at the address shown for the Holder on the register of Warrants referred to in paragraph (n).

 

[Signatures appear on the following page.]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Warrant on the date first set forth above.

 

	HOLDER:
	By:
	Name:
	Title:

 

	COMPANY:
	AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC.
	By:
	Name:
	Title:

 

 

PURCHASE FORM / EXCHANGE NOTICE [circle one]

 

(1)

The undersigned hereby irrevocably elects to exercise the within Warrant to the extent of purchasing shares of Common Stock of American Virtual Cloud Technologies, Inc. (or such number of shares of Common Stock or other securities or property to which the undersigned is entitled in lieu thereof or in addition thereto under the provisions of the Warrant).

 

(2)

The undersigned hereby elects to make payment (Please check one):

 

___

on a cashless basis pursuant to the provisions of Section (a)(2) of the Warrant.

 

___

with the enclosed bank draft, certified check or money order payable to the Company in payment of the exercise price determined under, and on the terms specified in, the Warrant.

 

(3)

The undersigned hereby irrevocably directs that the said shares be issued and delivered as follows:

 

Name(s) in Full	Address(es)	Number of Shares	S.S. or IRS #

 

(4)

If the Warrant was not exercised in full, please check the following:

 

The undersigned hereby irrevocably directs that any remaining portion of the warrant be issued and delivered as follows:

 

Name(s) in Full	Address(es)	Number of Shares	S.S. or IRS #

 

	Signature of Holder
	Print Name

 

 

 

Exhibit 10.1

 

GUARANTY

 

THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN SECTION 3 OF THE DEBENTURES (AS DEFINED HEREIN) TO THE SENIOR INDEBTEDNESS (AS DEFINED IN THE DEBENTURES), AND EACH HOLDER OF THIS GUARANTY, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF SECTIONS 3 AND 12 OF THE DEBENTURES.

 

THIS GUARANTY (this “Guaranty”), dated as of ______________, 2020, between entities named as guarantors on the signature pages this Guaranty _____________ (the “Guarantors” and each a “Guarantor”), each of which Guarantors is a subsidiary of American Virtual Cloud Technologies, Inc., a Delaware corporation (the “Company”).

 

W I T N E S S E T H

 

WHEREAS, the Company and has heretofore executed and delivered to the Holders one or more Convertible Debentures dated the date hereof in an aggregate principal amount of $__________ and may thereafter execute and deliver additional Convertible Debentures in an additional aggregate principal amount not to exceed $___________ (the “Debentures”);

 

WHEREAS, Section 14 of the Debentures provides that the Guarantors shall execute and deliver to each Holder a Guaranty pursuant to which the Guarantors shall unconditionally guarantee all of the Company’s obligations under the Debentures on the terms and conditions set forth herein (the “Debenture Guarantee”); and

 

WHEREAS, the Guarantors are authorized to execute and deliver this Guaranty.

 

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, including the benefits to be received by the Guarantors from the financing provided by the issuance of the Debentures and the other securities issued contemporaneously therewith, the receipt of which is hereby acknowledged, each Guarantor and the Company mutually covenant and agree for the equal and ratable benefit of the Holders of the Debentures as follows:

 

1.  DEFINED TERMS. Capitalized terms used but not defined herein shall have the meanings given to them in the Debentures or the Purchase Agreement, as applicable.

 

2.  AGREEMENT TO GUARANTEE.

 

(a) Each Guarantor hereby agrees, jointly and severally with all other Guarantors hereby, guarantees, to each Holder of a Debenture, irrespective of the validity and enforceability of the Debentures or the obligations of the Company hereunder or thereunder, that:

 

(1) the principal of, premium, if any, and interest on, the Debentures will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of and interest on the Debentures, if any, if lawful, and all other obligations of the Company to the Holders thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and

 

 

(2) in case of any extension of time of payment or renewal of any Debentures or any of such other obligations, that same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise.

 

Failing payment when due of any amount so guaranteed or any performance so guaranteed for whatever reason, Guarantors shall be jointly and severally obligated to pay the same immediately. Each Guarantor agrees that this is a guarantee of payment and not a guarantee of collection.

 

(b) The Guarantors hereby agree that their obligations hereunder are unconditional, irrespective of the validity, regularity or enforceability of the Debentures, the absence of any action to enforce the same, any waiver or consent by any Holder of the Debentures with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenant that this Guarantee will not be discharged except by complete performance of the obligations contained in the Debentures.

 

(c) If any Holder is required by any court or otherwise to return to the Company, the Guarantors or any custodian, trustee, liquidator or other similar official acting in relation to either the Company or the Guarantors, any amount paid by either to such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect.

 

(d) Each Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the Holders in respect of any obligations guaranteed hereby until payment in full of all obligations guaranteed hereby. Each Guarantor further agrees that, as between the Guarantors, on the one hand, and the Holders, on the other hand, (1) the maturity of the obligations guaranteed hereby may be accelerated as provided in the Debentures for the purposes of this Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (2) in the event of any such declaration of acceleration of such obligations, such obligations (whether or not due and payable) will forthwith become due and payable by the Guarantors for the purpose of this Guarantee. The Guarantors will have the right to seek contribution from any other Guarantor, or the Company, as the case may be, so long as the exercise of such right does not impair the rights of the Holders under the Debenture Guarantee.

 

(e) Each Guarantor, and by its acceptance of Debentures, each Holder, hereby confirms that it is the intention of all such parties that the Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of bankruptcy law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to any Guarantee. To effectuate the foregoing intention, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor shall be limited to the maximum amount that shall, after giving effect to such maximum amount and all other contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Guaranty, result in the obligations of such Guarantor under its Guaranty not constituting a fraudulent transfer or conveyance.

 

 

3. NOTICES. All notices or other communications to each Guarantor shall be given as provided in Section 8.2 of the Debentures.

 

4. RATIFICATION OF DEBENTURES; GUARANTIES PART OF DEBENTURES.  Except as expressly amended hereby, the Debentures are in all respects ratified and confirmed and all the terms, conditions and provisions thereof (including, without limitation, the terms and provisions of Section 3 of the Debentures in favor of the Senior Lender as defined therein) shall remain in full force and effect. This Guaranty shall form a part of the Debentures for all purposes, and every holder of Debentures heretofore or hereafter authenticated and delivered shall be bound hereby.

 

5. GOVERNING LAW. THIS GUARANTY AND THE DEBENTURES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, with the laws of the State of Delaware without giving effect to principles of conflict of laws that would cause the laws of another jurisdiction to apply.

 

6. COUNTERPARTS. The parties may sign any number of copies of this Guaranty. Each signed copy shall be an original, but all of them together represent the same agreement.

 

7. EFFECT OF HEADINGS. The Section headings herein are for convenience only and shall not affect the construction hereof.

 

IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly executed and attested, all as of the date first above written.

 

Dated:            , 20
[GUARANTOR]
By:
Name:
Title:

 

 

3

 

Exhibit 10.2

 

EXECUTION VERSION

 

AMENDED AND RESTATED VOTING AGREEMENT

 

This Amended and restated voting Agreement (this “Agreement”) is made and entered into as of December 1, 2020, by and among Ribbon Communications Operating Company, Inc., a Delaware corporation (“RCOCI”), Ribbon Communications International Limited, an Ireland company (“RCIL”, and together with RCOCI, each a “Seller” and collectively the “Sellers”), Ribbon Communications Inc., a Delaware corporation (“Parent”), and the undersigned holder (the “Holder”) of securities of American Virtual Cloud Technologies, Inc., a Delaware corporation (the “Company”). Capitalized terms used but not defined herein have the meaning attributed to them in the Purchase Agreement (as defined below).

 

Recitals

 

WHEREAS, the parties entered into that certain voting agreement on August 5, 2020 (the “Original Voting Agreement”) concurrently with the execution of that certain purchase agreement by and among Sellers, the Company and Ribbon Communications Inc., a Delaware corporation (“Parent”) (the “Original Purchase Agreement”), pursuant to which the Sellers and their respective Affiliates are selling the Business by selling the Purchased Interests and the Transferred Assets and assigning the Assumed Liabilities to the Company;

 

WHEREAS, the Sellers, the Company and Parent have amended and restated the Original Purchase Agreement as of the date hereof (the “Purchase Agreement”) and concurrently with entering into the Purchase Agreement, the parties have agreed to amend and restate the Original Voting Agreement in its entirety;

 

WHEREAS, the purchase price to be paid by the Company to Parent in consideration for all of Sellers’ and/or their respective Affiliates’ right, title and interest in, to and under the Transferred Assets and the Purchased Interests will be the issuance of the Consideration Units to Parent, which Consideration Units shall consist of Debentures and Warrants;

 

WHEREAS, as an inducement and a condition to Parent and Sellers entering into the Purchase Agreement and to consummate the transactions contemplated thereby, the Holder has agreed to enter into this Agreement, pursuant to which the Holder is agreeing, among other matters, to vote all of its Covered Stock (as defined below) in favor of the issuance of Common Stock to Parent upon the conversion of the Debentures issuable to Parent pursuant to the Purchase Agreement and the exercise of the Warrants issuable to Parent pursuant to the Purchase Agreement (collectively, the “Conversion Shares”);

 

WHEREAS, the obligations of Parent and the Sellers under the Purchase Agreement are conditioned, among other things, upon the execution and delivery of this Agreement by the Holder; and

 

WHEREAS, the parties desire to enter into this Agreement to set forth their agreements and understandings with respect to the issuance of the Conversion Shares to Parent.

 

 

NOW, THEREFORE, in consideration of the promises and the covenants and agreements set forth below, the parties agree as follows:

 

1.  No Transfer of Shares. During the term of this Agreement, the Holder shall not (a) cause or permit any Transfer (as defined below) of any of the Covered Stock or any right or interest therein, or (b) enter into any agreement, option, understanding or arrangement with respect to a Transfer of any of the Covered Stock. Except as required by this Agreement, the Holder shall not deposit (or permit the deposit of) any Covered Stock in a voting trust or grant any proxy or enter into any voting agreement or similar agreement with respect to any of the Covered Stock or in any way grant any other Person any right whatsoever with respect to the voting or disposition of the Covered Stock; provided, that the foregoing shall not prohibit the Transfer of Covered Stock to an Affiliate or other owner of Holder so long as such Affiliate of such transferee executes this Agreement or a joinder agreement to become a party to this Agreement. For purposes hereof, a Person shall be deemed to have effected a “Transfer” of Covered Stock if such Person directly or indirectly: (a) sells, pledges, encumbers, grants an option with respect to, transfers, assigns, or otherwise disposes of (including by merger (including by conversion into securities or other consideration), by tendering into any tender or exchange offer, by operation of Law or otherwise) such security, or any interest in such security; or (b) enters into an agreement, arrangement or commitment providing for the sale of, pledge of, encumbrance of, grant of an option with respect to, transfer of or disposition of such shares or any interest therein. Any Transfer or attempted Transfer in violation of this Agreement shall be null and void ab initio. It is hereby clarified that if any involuntary Transfer of any of the Covered Stock shall occur (such as in the case of appointment of a receiver to the Holder’s assets as part of bankruptcy proceedings), the transferee (which term, as used herein, shall include the initial transferee and any and all subsequent transferees of the initial transferee) shall take and hold such Covered Stock subject to all of the restrictions, liabilities and rights under this Agreement, which shall continue in full force and effect until the termination of this Agreement.

 

2.  Agreement to Vote Shares. The Holder irrevocably and unconditionally agrees that it shall at any meeting of the stockholders of the Company or at any adjournment thereof, in the action by written consent or in any other circumstances upon which the Holder’s vote, consent or other approval is sought in connection with the Purchase Agreement and the issuance of the Conversion Shares to Parent upon the conversion of the Debentures issuable to Parent pursuant to the Purchase Agreement and the exercise of the Warrants issuable to Parent pursuant to the Purchase Agreement, to (i) appear at each such meeting or otherwise cause all of its Covered Stock to be counted as present thereat for purpose of establishing a quorum and (ii) vote (or cause to be voted), in person or by proxy, all of the Covered Stock that are then entitled to be voted (a) in favor of the transactions contemplated by the Purchase Agreement, including the issuance of the Conversion Shares to Parent, (b) in favor of any action, proposal, transaction or agreement that is submitted by the Company for a vote of the stockholders of the Company and would reasonably be expected to facilitate the transactions contemplated by the Purchase Agreement, (c) in favor of any proposal to adjourn or postpone to a later date any meeting of the stockholders of the Company at which any of the foregoing matters of this Section 2 are submitted for consideration and vote of the stockholders of the Company if there are not sufficient votes for approval of any such matters on the date on which the meeting is held, and (d) against (1) any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company or any of its Subsidiaries contained in the Purchase Agreement, or of such Holder contained in this Agreement, and (2) any other action that would reasonably be expected to impede, interfere with, delay, postpone or adversely affect or prevent the transactions contemplated by the Purchase Agreement or this Agreement, or the issuance of the Conversion Shares. The Holder shall execute and deliver to the Company a written consent in favor of the transactions contemplated under the Purchase Agreement and the terms of the Purchase Agreement and the Ancillary Agreements reflected therein and the issuance of the Conversion Shares as soon as practicable and in any event within two (2) Business Days after the date of receipt from the Company of a written consent in proper form if no meeting of the stockholders has then been called for such purpose. The Holder agrees that the shares of the Covered Stock that are entitled to be voted shall be voted (or cause to be voted) as set forth in the preceding sentences.

 

 

3.  Director Matters/280G Matters Excluded. No provision of this Agreement shall limit or otherwise restrict the Holder with respect to any vote that the Holder (or, if the Holder is not a natural person, the Holder’s representative) may make solely in his or her capacity as a director of the Company with respect to a matter presented to the Company Board.

 

4.  Irrevocable Proxy.

 

(a)  Concurrently with the execution of this Agreement, the Holder has executed and delivered to the Company an irrevocable proxy in the form attached hereto as Exhibit A (the “Proxy”), which Proxy shall be irrevocable to the fullest extent permissible by Law, with respect to the Covered Stock. The Proxy granted by the Holder shall not be exercised to vote, consent or act on any matter except as contemplated by Section 2 of this Agreement. The parties acknowledge and agree that the proxy previously delivered by Holder on August 5, 2020 shall be terminated and be of no further force and effect.

 

(b)  If, and only if, for any reason the Proxy granted pursuant to this Agreement is deemed to be revocable, then the Holder agrees to vote the Covered Stock that are then entitled to vote in accordance with Section 2 of this Agreement.

 

5.  Representations and Warranties of the Holder. The Holder hereby represents and warrants to the Sellers as follows:

 

(a)  The Holder (i) is the record and beneficial owner of the Common Stock and other securities of the Company set forth on Schedule A (collectively, the “Existing Stock”), free and clear of any Encumbrances of any nature whatsoever (other than pursuant to (x) applicable restrictions on transfer under applicable securities laws, (y) restrictions on transfer pursuant to that certain Stock Escrow Agreement, dated as of July 27, 2017, to which the Holder and the Company are parties or (z) this Agreement), and (ii) does not beneficially own any securities of the Company (including options, warrants or convertible securities) other than the Existing Stock.

 

(b)  Except as set forth on Schedule A, the Holder has the sole right to Transfer, to vote and to direct the voting of the Existing Stock (or, if this Agreement also is signed by the Holder’s spouse, the Holder and his or her spouse, if applicable, together have the sole right to Transfer, to vote and to direct the voting of the Existing Stock), and none of the Existing Stock are subject to any voting trust or other agreement, arrangement or restriction with respect to the Transfer or the voting of the Existing Stock, except as set forth in this Agreement.

 

(c)  The Holder, if not a natural person: (i) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (ii) is not in violation of any of the provision of the Holder’s organizational documents, and (iii) has the requisite corporate, company, partnership or other power and authority to execute and deliver this Agreement and the Proxy, to consummate the transactions contemplated hereby and thereby and to comply with the terms hereof and thereof. The execution and delivery by the Holder of this Agreement and the Proxy, the consummation by the Holder of the transactions contemplated hereby and thereby and the compliance by the Holder with the provisions hereof and thereof have been duly authorized by all necessary corporate, company, partnership or other action on the part of the Holder, and no other corporate, company, partnership or other proceedings on the part of the Holder are necessary to authorize this Agreement and the Proxy, to consummate the transactions contemplated hereby and thereby or to comply with the provisions hereof or thereof.

 

 

(d)  Each of this Agreement and the Proxy has been duly executed and delivered by the Holder, constitutes a valid and binding obligation of the Holder and is enforceable against the Holder in accordance with its terms, except as such enforceability may be subject to applicable bankruptcy, reorganization, insolvency, moratorium and similar Laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

 

(e)  The execution and delivery of this Agreement and the Proxy, the consummation of the transactions contemplated hereby and thereby and compliance with the provisions hereof and thereof do not and will not conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, any provision of (i) the organizational documents of the Holder, if applicable, (ii) any (A) statute, law, ordinance, rule or regulation or (B) judgment, order or decree, in each case, applicable to the Holder or its properties or assets, or (iii) any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which the Holder is a party or by which the Holder or the Holder’s assets are bound. The execution and delivery by the Holder of this Agreement does not, and the performance of the Holder’s obligations hereunder does not, require such Holder or any of its Affiliates to obtain any consent, approval, authorization or permit of, or to make any filing with or notification to, any person or Governmental Authority, other than any filings as may be required under the Securities Exchange Act of 1934, as amended, or the rules or regulations promulgated thereunder.

 

(f)  There is no action, suit, investigation, complaint or other proceeding pending against, involving or affecting the Holder or the Existing Stock or, to the knowledge of the Holder, any other person, or, to the knowledge of the Holder, threatened against, involving or affecting the Holder or the Existing Stock or any other person that would reasonably be expected to restrict or prohibit (or, if successful, would restrict or prohibit) the performance by the Holder of its obligations under this Agreement.

 

(g)  The Holder understands and acknowledges that Parent and Sellers are entering into the Purchase Agreement in reliance upon the Holder’s execution, delivery and performance of this Agreement. The Holder is sophisticated holder with respect to the Existing Stock and has adequate information concerning the transactions contemplated hereby and by the Purchase Agreement and concerning the business and financial condition of the Company to make an informed decision regarding the matters referred to herein and has independently, without reliance upon Parent, Sellers or any of their respective Affiliates, and based on such information as the Holder has deemed appropriate, made the Holder’s own analysis and decision to enter into this Agreement.

 

6.  Termination. This Agreement shall terminate upon the earliest to occur of (a) the valid termination of the Purchase Agreement in accordance with its terms and (b) the Company obtaining the Requisite Buyer Stockholder Approval. In the event of the termination of this Agreement, this Agreement and the Proxy shall forthwith become null and void, there shall be no liability on the part of any of the parties, and all rights and obligations of each party hereto shall cease; provided, however, that no such termination of this Agreement shall relieve any party hereto from any liability for any breach of any provision of this Agreement prior to such termination; provided, further, that Section 9 and Sections 11 to 17 shall survive any such termination.

 

7.  Further Covenants and Assurances.

 

(a)  Until the Closing, the Holder shall not, and the Holder shall not permit any of its Affiliates or Representatives to, directly or indirectly (i) solicit, initiate, entertain or agree to any proposals or offers from any Person relating to a third-party acquisition or (ii) participate in any discussions or negotiations regarding, or furnish to any Person any information with respect to, or otherwise cooperate with, facilitate or encourage any effort or attempt by any Person to do or seek, a third-party acquisition. The Holder will, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments as Sellers may reasonably request for the purpose of effectively carrying out the provisions of this Agreement and the transactions contemplated hereby.

 

 

(b)  If, prior to the Closing, the Holder (in such capacity) receives an inquiry, proposal or offer relating to a third-party acquisition from any Person, the Holder will, subject to any confidentiality obligations to which the Holder is subject, (i) promptly notify Sellers of the same and the details thereof (including the identity of the Person making same), (ii) provide to Sellers a copy of any written inquiry, proposal or offer and all correspondence related thereto, and (iii) keep Sellers informed of the status thereof. The Holder will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any persons conducted prior to the date hereof with respect to any third-party acquisition.

 

(c)  The Holder shall not take any action that would make any representation or warranty of the Holder contained herein untrue or incorrect or would reasonably be likely to adversely affect, prevent or delay (i) the Holder from performing any of the Holder’s obligations under this Agreement (it being understood that nothing contained in this Agreement shall be deemed to restrict the ability of the Holder to exercise any voting rights with respect to the Existing Stock consistent with this Agreement (but not Transfer) held by the Holder as of the date hereof) or (ii) the Requisite Buyer Stockholder Approval from being obtained.

 

(d)  The Holder agrees that it will not bring, commence, institute, maintain, prosecute, participate in or voluntarily aid any action, claim, suit or cause of action, in Law or in equity, in any court or before any Governmental Authority, which (i) challenges the validity of or seeks to enjoin the operation of any provision of this Agreement or (ii) alleges that the execution and delivery of this Agreement by the Holder, either alone or together with the other voting agreements and proxies to be delivered in connection with the execution of the Purchase Agreement, or the approval of the Purchase Agreement by the board of directors of the Company, breaches any fiduciary duty of the board of directors of the Company or any member thereof; provided, that the Holder may defend against, contest or settle any such action, claim, suit or cause of action brought against the Holder that relates solely to the Holder’s capacity as a director or officer of the Company.

 

(e)  The Holder agrees that any additional securities of the Company acquired by the Holder after the date of this Agreement and prior to the termination of this Agreement (including through the exercise of any stock options or otherwise) (together with the Existing Stock, the “Covered Stock”) shall automatically be subject to the terms of this Agreement as though owned by the Holder on the date hereof.

 

8.  Holder Release. Conditioned upon and effective as of the Closing, the Holder, as an inducement to Sellers to enter into the Purchase Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, hereby fully and completely forever releases and discharges the Sellers, the Company and their respective current and former Affiliates and all of their respective past or present stockholders, partners, members, officers, directors, employees and representatives and each of their respective heirs, executors, predecessors, successors and assigns (collectively, the “Releasees”), from any and all claims, actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, expenses, executions, affirmative defenses, demands and other obligations or liabilities whatsoever, in law or equity, whether known or unknown to the Holder, fixed or contingent, which the Holder ever had, now have or may have against any of the Releasees, based on or arising out of any matter, cause, act or omission whatsoever, occurring or existing at any time up to and including the Closing, including, without limitation, for, upon, or by reason of any action, omission, event, occurrence or circumstance related to the operation of the business of the Company or its Subsidiaries or the Business that has occurred prior to the Closing; provided, however, that the foregoing shall not release any Person from (i) any obligation of such Person under any provision of the Purchase Agreement or any other Ancillary Agreement arising before or after the Closing, (ii) any claims for indemnification or for advancement or reimbursement of expenses as a past or present officer or director under the Company’s organizational documents or under applicable Law or (iii) relating to salary, bonuses, severance, change of control or retention compensation or accrued vacation or other paid time off, any other employee or director compensation and/or benefits, and unreimbursed expenses. The foregoing release is conditioned upon the consummation of the transactions as contemplated in the Purchase Agreement, and shall become null and void, and shall have no effect whatsoever, without any action on the part of any person or entity, upon termination of the Purchase Agreement for any reason.

 

 

9.  Successors, Assigns and Transferees Bound. Without limiting Section 1 hereof in any way, the Holder agrees that this Agreement and the obligations hereunder shall attach to the Covered Stock from the date hereof through the termination of this Agreement and shall be binding upon any Person to which legal or beneficial ownership of the Covered Stock shall pass, whether by operation of Law or otherwise, including the Holder’s heirs, guardians, administrators or successors, and the Holder further agrees to take all actions necessary to effectuate the foregoing. Any shares of Company Stock or any options, warrants or convertible securities (in each case, whether or not vested) to acquire shares of Company Stock received by the Holder in connection with any stock split, exchange of shares, stock dividend, reclassification, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Stock shall be deemed to be included as “Existing Stock” and “Covered Stock”, and this Agreement and the representations, warranties, covenants, agreements and obligations hereunder shall attach to any such additional Common Stock.

 

10.  Deposit. The Holder shall cause a counterpart of this Agreement to be deposited with the Company at its principal place of business or registered office where it shall be subject to the same right of examination by any stockholder, in person or by agent or attorney, as are the books and records of the Company.

 

11.  Public Disclosure. Except as contemplated by the Purchase Agreement or as otherwise required by Law, court order or regulatory authority, no disclosure (whether or not in response to an inquiry) of the subject matter of this Agreement or the Purchase Agreement shall be made prior to the Closing by or on behalf of the Holder (including any Representative of the Holder) (other than disclosures to managers, advisors or equity holders of the Holder on a need to know basis in connection with the approval of the Purchase Agreement and the transactions contemplated thereby) unless approved by Sellers prior to such disclosure. Notwithstanding the immediately preceding sentence, in the event that the Holder is required by Law or court order to make any such disclosure, the Holder may make such disclosure; provided that the Holder shall notify Sellers prior to making such disclosure, shall use its commercially reasonable efforts to give Sellers an opportunity (as is reasonable under the circumstances) to comment on such disclosure, and shall make only such disclosure as it is legally obligated to disclose. Solely to the extent required by applicable Law, the Holder hereby authorizes Parent , Sellers and the Company to publish and disclose in any announcement, filing or disclosure required by the SEC the Holder’s identity and ownership of the Covered Stock and the nature of the Holder’s obligations under this Agreement. The Holder agrees as promptly as practicable to give to Parent, Sellers and the Company any information that it may reasonably require for the preparation of any such announcement or disclosure documents and agrees to promptly notify Parent, Sellers and the Company of any required corrections with respect to any written information supplied by it specifically for use in any such disclosure document, if any, to the extent that any shall be or have become false or misleading, in any material respect.

 

12.  Remedies. The Holder acknowledges that money damages would be both incalculable and an insufficient remedy for any breach of this Agreement by it, and that any such breach would cause Sellers irreparable harm. Accordingly, the Holder agrees that in the event of any breach or threatened breach of this Agreement, Sellers, in addition to any other remedies at Law or in equity it may have, shall be entitled to seek immediate equitable relief, including injunctive relief and specific performance, without the necessity of proving the inadequacy of money damages as a remedy and without the necessity of posting any bond or other security, to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction.

 

 

13.  Notices. All notices, requests, consents, Claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand; (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the third (3^rd) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 13)

 

(i)  if to Sellers, to

 

Ribbon Communications Inc.

4 Technology Park Drive

Westford, Massachusetts 01886

Attention: Patrick Macken, EVP and Chief Legal Officer

E-Mail: [email protected]

 

with a copy to (which shall not constitute notice):

 

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022-4834

Attention: David Allinson; Jane Greyf

E-Mail: [email protected]; [email protected]

 

(ii) if to the Holder, to the address set forth on Schedule A hereto.

 

14.  Severability. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of any other provision of this Agreement in such jurisdiction, or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

 

15.  Entire Agreement/Amendment. This Agreement and the Proxy represent the entire agreement of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. Neither this Agreement nor the Proxy may be amended, modified, altered or supplemented except by means of a written instrument executed and delivered by the parties hereto.

 

16.  Governing Law. This Agreement and the Proxy shall be construed in accordance with, and governed in all respects by, the internal laws of the State of Delaware without regard to the Laws of such jurisdiction that would require the substantive Laws of another jurisdiction to apply. Unless otherwise explicitly provided in this Agreement, any action, claim, suit or proceeding relating to this Agreement or the Proxy or the enforcement of any provision of this Agreement or the Proxy shall be brought or otherwise commenced only in any state or federal court located in Delaware. Each party hereto (a) expressly and irrevocably consents and submits to the exclusive jurisdiction of the Delaware Court of Chancery (or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware) in any action arising out of or relating to this Agreement or any of the matters contemplated hereby; (b) agrees that each such court shall be deemed to be a convenient forum; (c) agrees that service of process in any such proceeding may be made by giving notice pursuant to Section 13; and (d) agrees not to assert, by way of motion, as a defense or otherwise, in any such proceeding commenced in any such court, any claim that such party is not subject personally to the jurisdiction of such court, that such proceeding has been brought in an inconvenient forum, that the venue of such proceeding is improper or that this Agreement or the Proxy or the subject matter of this Agreement or the Proxy may not be enforced in or by such court.

 

17.  Counterparts. For the convenience of the parties, this Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

[Remainder of page intentionally left blank]

 

 

In Witness Whereof, the parties have caused this Agreement to be executed as of the date first above written.

 

	Holder:
	Pensare Sponsor Group, Inc.
	By:	/s/ Robert E. Willis
	Name:	Robert E. Willis
	Title:	Manager
	Sellers:
	Ribbon Communications Operating Company, Inc.
	By:	/s/ Miguel Lopez
	Name:	Miguel Lopez
	Title:	President & Chief Executive Officer
	Ribbon Communications International Limited
	By:	/s/ Eric S. Marmurek
	Name:	Eric S. Marmurek
	Title:	Director
	Parent:
	Ribbon Communications Inc.
	By:	/s/ Bruce McClelland
	Name:	Bruce McClelland
	Title:	President & Chief Executive Officer

 

Signature Page to the Voting Agreement

 

 

SCHEDULE A

 

Name and Address of Holder		Shares of Company Common Stock		PIPE Convertible Debentures		Company Warrants
Pensare Sponsor Group, LLC   1720 Peachtree St NW Ste 629 Atlanta, GA  30309		5,818,500 shares of Common Stock		$2,260,000		7,017,290 warrants ($11.50 strike price)   226,000 PIPE unit warrants ($.01 strike price)

  

 

EXHIBIT A

Irrevocable Proxy

 

The undersigned holder (the “Holder”) of outstanding securities of American Virtual Cloud Technologies, Inc., a Delaware corporation (the “Company”), solely in its, his or her capacity as a holder of securities of the Company, hereby irrevocably appoints __________________, as the sole and exclusive attorney and proxy of the undersigned, with full power of substitution and resubstitution, to vote and exercise all voting, consent and similar rights with respect to all of the Covered Stock (as defined in the Voting Agreement, as defined below) until the Expiration Date (as defined below) as specified below. Upon the undersigned’s execution of this Proxy, any and all prior proxies given by the undersigned with respect to the Covered Stock are hereby revoked and the undersigned agrees not to grant any subsequent proxies with respect to the Covered Stock until after the Expiration Date.

 

This Proxy is irrevocable, is coupled with an interest sufficient in law to support an irrevocable power and made for the benefit of third parties, and is granted pursuant to that certain Voting Agreement (the “Voting Agreement”) of even date herewith by and among Ribbon Communications Operating Company, Inc., a Delaware corporation (“RCOCI”), Ribbon Communications International Limited, an Ireland company (“RCIL”, and together with RCOCI, each a “Seller” and collectively the “Sellers”) and the Holder, and is granted solely in furtherance of Holder’s undertaking to vote the Covered Stock as required by the Voting Agreement contemplated by that certain Purchase Agreement of even date herewith (the “Purchase Agreement”), by and among the Company, the Sellers and Ribbon Communications Inc., a Delaware corporation. As used herein, the term “Expiration Date” shall mean the date of termination of the Voting Agreement in accordance with its terms. Capitalized terms used but not defined herein have the meaning attributed to them in the Purchase Agreement.

 

The attorney and proxy named above is hereby authorized and empowered by the Holder, at any time prior to the Expiration Date, to act as the Holder’s attorney and proxy to vote the Covered Stock and to exercise all voting, consent and similar rights of the Holder with respect to the Covered Stock (including, without limitation, the power to execute and deliver written consents), in accordance with Section 2 of the Voting Agreement, at any meeting of stockholders of the Company or at any adjournment thereof, in any action by written consent or in any other circumstances upon which the Holder’s vote, consent or other approval is sought in connection with the Purchase Agreement and issuance of the Issued Shares pursuant to the Purchase Agreement.

 

Any obligation of the Holder hereunder shall be binding upon the successors and assigns of the Holder.

 

This Proxy shall terminate, and be of no further force or effect, automatically upon the Expiration Date.

 

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	Holder
	Pensare Sponsor Group, LLC
	By:
	Name:
	[Title:]
	Dated: _________ ___, 2020

 

 

 

 

Exhibit 10.3

 

EXECUTION VERSION

 

AMENDED AND RESTATED VOTING AGREEMENT

 

This Amended and restated voting Agreement (this “Agreement”) is made and entered into as of December 1, 2020, by and among Ribbon Communications Operating Company, Inc., a Delaware corporation (“RCOCI”), Ribbon Communications International Limited, an Ireland company (“RCIL”, and together with RCOCI, each a “Seller” and collectively the “Sellers”), Ribbon Communications Inc., a Delaware corporation (“Parent”), and the undersigned holder (the “Holder”) of securities of American Virtual Cloud Technologies, Inc., a Delaware corporation (the “Company”). Capitalized terms used but not defined herein have the meaning attributed to them in the Purchase Agreement (as defined below).

 

Recitals

 

WHEREAS, the parties entered into that certain voting agreement on August 5, 2020 (the “Original Voting Agreement”) concurrently with the execution of that certain purchase agreement by and among Sellers, the Company and Ribbon Communications Inc., a Delaware corporation (“Parent”) (the “Original Purchase Agreement”), pursuant to which the Sellers and their respective Affiliates are selling the Business by selling the Purchased Interests and the Transferred Assets and assigning the Assumed Liabilities to the Company;

 

WHEREAS, the Sellers, the Company and Parent have amended and restated the Original Purchase Agreement as of the date hereof (the “Purchase Agreement”) and concurrently with entering into the Purchase Agreement, the parties have agreed to amend and restate the Original Voting Agreement in its entirety;

 

WHEREAS, the purchase price to be paid by the Company to Parent in consideration for all of Sellers’ and/or their respective Affiliates’ right, title and interest in, to and under the Transferred Assets and the Purchased Interests will be the issuance of the Consideration Units to Parent, which Consideration Units shall consist of Debentures and Warrants;

 

WHEREAS, as an inducement and a condition to Parent and Sellers entering into the Purchase Agreement and to consummate the transactions contemplated thereby, the Holder has agreed to enter into this Agreement, pursuant to which the Holder is agreeing, among other matters, to vote all of its Covered Stock (as defined below) in favor of the issuance of Common Stock to Parent upon the conversion of the Debentures issuable to Parent pursuant to the Purchase Agreement and the exercise of the Warrants issuable to Parent pursuant to the Purchase Agreement (collectively, the “Conversion Shares”);

 

WHEREAS, the obligations of Parent and the Sellers under the Purchase Agreement are conditioned, among other things, upon the execution and delivery of this Agreement by the Holder; and

 

WHEREAS, the parties desire to enter into this Agreement to set forth their agreements and understandings with respect to the issuance of the Conversion Shares to Parent.

 

 

NOW, THEREFORE, in consideration of the promises and the covenants and agreements set forth below, the parties agree as follows:

 

1.  No Transfer of Shares. During the term of this Agreement, the Holder shall not (a) cause or permit any Transfer (as defined below) of any of the Covered Stock or any right or interest therein, or (b) enter into any agreement, option, understanding or arrangement with respect to a Transfer of any of the Covered Stock. Except as required by this Agreement, the Holder shall not deposit (or permit the deposit of) any Covered Stock in a voting trust or grant any proxy or enter into any voting agreement or similar agreement with respect to any of the Covered Stock or in any way grant any other Person any right whatsoever with respect to the voting or disposition of the Covered Stock; provided, that the foregoing shall not prohibit the Transfer of Covered Stock to an Affiliate or other owner of Holder so long as such Affiliate of such transferee executes this Agreement or a joinder agreement to become a party to this Agreement. For purposes hereof, a Person shall be deemed to have effected a “Transfer” of Covered Stock if such Person directly or indirectly: (a) sells, pledges, encumbers, grants an option with respect to, transfers, assigns, or otherwise disposes of (including by merger (including by conversion into securities or other consideration), by tendering into any tender or exchange offer, by operation of Law or otherwise) such security, or any interest in such security; or (b) enters into an agreement, arrangement or commitment providing for the sale of, pledge of, encumbrance of, grant of an option with respect to, transfer of or disposition of such shares or any interest therein. Any Transfer or attempted Transfer in violation of this Agreement shall be null and void ab initio. It is hereby clarified that if any involuntary Transfer of any of the Covered Stock shall occur (such as in the case of appointment of a receiver to the Holder’s assets as part of bankruptcy proceedings), the transferee (which term, as used herein, shall include the initial transferee and any and all subsequent transferees of the initial transferee) shall take and hold such Covered Stock subject to all of the restrictions, liabilities and rights under this Agreement, which shall continue in full force and effect until the termination of this Agreement.

 

2.  Agreement to Vote Shares. The Holder irrevocably and unconditionally agrees that it shall at any meeting of the stockholders of the Company or at any adjournment thereof, in the action by written consent or in any other circumstances upon which the Holder’s vote, consent or other approval is sought in connection with the Purchase Agreement and the issuance of the Conversion Shares to Parent upon the conversion of the Debentures issuable to Parent pursuant to the Purchase Agreement and the exercise of the Warrants issuable to Parent pursuant to the Purchase Agreement, to (i) appear at each such meeting or otherwise cause all of its Covered Stock to be counted as present thereat for purpose of establishing a quorum and (ii) vote (or cause to be voted), in person or by proxy, all of the Covered Stock that are then entitled to be voted (a) in favor of the transactions contemplated by the Purchase Agreement, including the issuance of the Conversion Shares to Parent, (b) in favor of any action, proposal, transaction or agreement that is submitted by the Company for a vote of the stockholders of the Company and would reasonably be expected to facilitate the transactions contemplated by the Purchase Agreement, (c) in favor of any proposal to adjourn or postpone to a later date any meeting of the stockholders of the Company at which any of the foregoing matters of this Section 2 are submitted for consideration and vote of the stockholders of the Company if there are not sufficient votes for approval of any such matters on the date on which the meeting is held, and (d) against (1) any action or agreement that would result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company or any of its Subsidiaries contained in the Purchase Agreement, or of such Holder contained in this Agreement, and (2) any other action that would reasonably be expected to impede, interfere with, delay, postpone or adversely affect or prevent the transactions contemplated by the Purchase Agreement or this Agreement, or the issuance of the Conversion Shares. The Holder shall execute and deliver to the Company a written consent in favor of the transactions contemplated under the Purchase Agreement and the terms of the Purchase Agreement and the Ancillary Agreements reflected therein and the issuance of the Conversion Shares as soon as practicable and in any event within two (2) Business Days after the date of receipt from the Company of a written consent in proper form if no meeting of the stockholders has then been called for such purpose. The Holder agrees that the shares of the Covered Stock that are entitled to be voted shall be voted (or cause to be voted) as set forth in the preceding sentences.

 

 

3.  Director Matters/280G Matters Excluded. No provision of this Agreement shall limit or otherwise restrict the Holder with respect to any vote that the Holder (or, if the Holder is not a natural person, the Holder’s representative) may make solely in his or her capacity as a director of the Company with respect to a matter presented to the Company Board.

 

4.  Irrevocable Proxy.

 

(a)  Concurrently with the execution of this Agreement, the Holder has executed and delivered to the Company an irrevocable proxy in the form attached hereto as Exhibit A (the “Proxy”), which Proxy shall be irrevocable to the fullest extent permissible by Law, with respect to the Covered Stock. The Proxy granted by the Holder shall not be exercised to vote, consent or act on any matter except as contemplated by Section 2 of this Agreement. The parties acknowledge and agree that the proxy previously delivered by Holder on August 5, 2020 shall be terminated and be of no further force and effect.

 

(b)  If, and only if, for any reason the Proxy granted pursuant to this Agreement is deemed to be revocable, then the Holder agrees to vote the Covered Stock that are then entitled to vote in accordance with Section 2 of this Agreement.

 

5.  Representations and Warranties of the Holder. The Holder hereby represents and warrants to the Sellers as follows:

 

(a) The Holder (i) is the record and beneficial owner of the Common Stock and other securities of the Company set forth on Schedule A (collectively, the “Existing Stock”), free and clear of any Encumbrances of any nature whatsoever (other than pursuant to (x) applicable restrictions on transfer under applicable securities laws, or (y) this Agreement), and (ii) does not beneficially own any securities of the Company (including options, warrants or convertible securities) other than the Existing Stock.

 

(b)  Except as set forth on Schedule A, the Holder has the sole right to Transfer, to vote and to direct the voting of the Existing Stock (or, if this Agreement also is signed by the Holder’s spouse, the Holder and his or her spouse, if applicable, together have the sole right to Transfer, to vote and to direct the voting of the Existing Stock), and none of the Existing Stock are subject to any voting trust or other agreement, arrangement or restriction with respect to the Transfer or the voting of the Existing Stock, except as set forth in this Agreement.

 

(c)  The Holder, if not a natural person: (i) is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, (ii) is not in violation of any of the provision of the Holder’s organizational documents, and (iii) has the requisite corporate, company, partnership or other power and authority to execute and deliver this Agreement and the Proxy, to consummate the transactions contemplated hereby and thereby and to comply with the terms hereof and thereof. The execution and delivery by the Holder of this Agreement and the Proxy, the consummation by the Holder of the transactions contemplated hereby and thereby and the compliance by the Holder with the provisions hereof and thereof have been duly authorized by all necessary corporate, company, partnership or other action on the part of the Holder, and no other corporate, company, partnership or other proceedings on the part of the Holder are necessary to authorize this Agreement and the Proxy, to consummate the transactions contemplated hereby and thereby or to comply with the provisions hereof or thereof.

 

 

(d)  Each of this Agreement and the Proxy has been duly executed and delivered by the Holder, constitutes a valid and binding obligation of the Holder and is enforceable against the Holder in accordance with its terms, except as such enforceability may be subject to applicable bankruptcy, reorganization, insolvency, moratorium and similar Laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

 

(e)  The execution and delivery of this Agreement and the Proxy, the consummation of the transactions contemplated hereby and thereby and compliance with the provisions hereof and thereof do not and will not conflict with, or result in any violation or breach of, or default (with or without notice or lapse of time, or both) under, any provision of (i) the organizational documents of the Holder, if applicable, (ii) any (A) statute, law, ordinance, rule or regulation or (B) judgment, order or decree, in each case, applicable to the Holder or its properties or assets, or (iii) any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which the Holder is a party or by which the Holder or the Holder’s assets are bound. The execution and delivery by the Holder of this Agreement does not, and the performance of the Holder’s obligations hereunder does not, require such Holder or any of its Affiliates to obtain any consent, approval, authorization or permit of, or to make any filing with or notification to, any person or Governmental Authority, other than any filings as may be required under the Securities Exchange Act of 1934, as amended, or the rules or regulations promulgated thereunder.

 

(f)  There is no action, suit, investigation, complaint or other proceeding pending against, involving or affecting the Holder or the Existing Stock or, to the knowledge of the Holder, any other person, or, to the knowledge of the Holder, threatened against, involving or affecting the Holder or the Existing Stock or any other person that would reasonably be expected to restrict or prohibit (or, if successful, would restrict or prohibit) the performance by the Holder of its obligations under this Agreement.

 

(g)  The Holder understands and acknowledges that Parent and Sellers are entering into the Purchase Agreement in reliance upon the Holder’s execution, delivery and performance of this Agreement. The Holder is sophisticated holder with respect to the Existing Stock and has adequate information concerning the transactions contemplated hereby and by the Purchase Agreement and concerning the business and financial condition of the Company to make an informed decision regarding the matters referred to herein and has independently, without reliance upon Parent, Sellers or any of their respective Affiliates, and based on such information as the Holder has deemed appropriate, made the Holder’s own analysis and decision to enter into this Agreement.

 

6.  Termination. This Agreement shall terminate upon the earliest to occur of (a) the valid termination of the Purchase Agreement in accordance with its terms and (b) the Company obtaining the Requisite Buyer Stockholder Approval. In the event of the termination of this Agreement, this Agreement and the Proxy shall forthwith become null and void, there shall be no liability on the part of any of the parties, and all rights and obligations of each party hereto shall cease; provided, however, that no such termination of this Agreement shall relieve any party hereto from any liability for any breach of any provision of this Agreement prior to such termination; provided, further, that Section 9 and Sections 11 to 17 shall survive any such termination.

 

7.  Further Covenants and Assurances.

 

(a)  Until the Closing, the Holder shall not, and the Holder shall not permit any of its Affiliates or Representatives to, directly or indirectly (i) solicit, initiate, entertain or agree to any proposals or offers from any Person relating to a third-party acquisition or (ii) participate in any discussions or negotiations regarding, or furnish to any Person any information with respect to, or otherwise cooperate with, facilitate or encourage any effort or attempt by any Person to do or seek, a third-party acquisition. The Holder will, from time to time, execute and deliver, or cause to be executed and delivered, such additional or further consents, documents and other instruments as Sellers may reasonably request for the purpose of effectively carrying out the provisions of this Agreement and the transactions contemplated hereby.

 

 

(b)  If, prior to the Closing, the Holder (in such capacity) receives an inquiry, proposal or offer relating to a third-party acquisition from any Person, the Holder will, subject to any confidentiality obligations to which the Holder is subject, (i) promptly notify Sellers of the same and the details thereof (including the identity of the Person making same), (ii) provide to Sellers a copy of any written inquiry, proposal or offer and all correspondence related thereto, and (iii) keep Sellers informed of the status thereof. The Holder will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any persons conducted prior to the date hereof with respect to any third-party acquisition.

 

(c)  The Holder shall not take any action that would make any representation or warranty of the Holder contained herein untrue or incorrect or would reasonably be likely to adversely affect, prevent or delay (i) the Holder from performing any of the Holder’s obligations under this Agreement (it being understood that nothing contained in this Agreement shall be deemed to restrict the ability of the Holder to exercise any voting rights with respect to the Existing Stock consistent with this Agreement (but not Transfer) held by the Holder as of the date hereof) or (ii) the Requisite Buyer Stockholder Approval from being obtained.

 

(d)  The Holder agrees that it will not bring, commence, institute, maintain, prosecute, participate in or voluntarily aid any action, claim, suit or cause of action, in Law or in equity, in any court or before any Governmental Authority, which (i) challenges the validity of or seeks to enjoin the operation of any provision of this Agreement or (ii) alleges that the execution and delivery of this Agreement by the Holder, either alone or together with the other voting agreements and proxies to be delivered in connection with the execution of the Purchase Agreement, or the approval of the Purchase Agreement by the board of directors of the Company, breaches any fiduciary duty of the board of directors of the Company or any member thereof; provided, that the Holder may defend against, contest or settle any such action, claim, suit or cause of action brought against the Holder that relates solely to the Holder’s capacity as a director or officer of the Company.

 

(e)  The Holder agrees that any additional securities of the Company acquired by the Holder after the date of this Agreement and prior to the termination of this Agreement (including through the exercise of any stock options or otherwise) (together with the Existing Stock, the “Covered Stock”) shall automatically be subject to the terms of this Agreement as though owned by the Holder on the date hereof.

 

8.  Holder Release. Conditioned upon and effective as of the Closing, the Holder, as an inducement to Sellers to enter into the Purchase Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, hereby fully and completely forever releases and discharges the Sellers, the Company and their respective current and former Affiliates and all of their respective past or present stockholders, partners, members, officers, directors, employees and representatives and each of their respective heirs, executors, predecessors, successors and assigns (collectively, the “Releasees”), from any and all claims, actions, causes of action, suits, debts, dues, sums of money, accounts, reckonings, covenants, contracts, controversies, agreements, promises, variances, trespasses, damages, judgments, expenses, executions, affirmative defenses, demands and other obligations or liabilities whatsoever, in law or equity, whether known or unknown to the Holder, fixed or contingent, which the Holder ever had, now have or may have against any of the Releasees, based on or arising out of any matter, cause, act or omission whatsoever, occurring or existing at any time up to and including the Closing, including, without limitation, for, upon, or by reason of any action, omission, event, occurrence or circumstance related to the operation of the business of the Company or its Subsidiaries or the Business that has occurred prior to the Closing; provided, however, that the foregoing shall not release any Person from (i) any obligation of such Person under any provision of the Purchase Agreement or any other Ancillary Agreement arising before or after the Closing, (ii) any claims for indemnification or for advancement or reimbursement of expenses as a past or present officer or director under the Company’s organizational documents or under applicable Law or (iii) relating to salary, bonuses, severance, change of control or retention compensation or accrued vacation or other paid time off, any other employee or director compensation and/or benefits, and unreimbursed expenses. The foregoing release is conditioned upon the consummation of the transactions as contemplated in the Purchase Agreement, and shall become null and void, and shall have no effect whatsoever, without any action on the part of any person or entity, upon termination of the Purchase Agreement for any reason.

 

 

9.  Successors, Assigns and Transferees Bound. Without limiting Section 1 hereof in any way, the Holder agrees that this Agreement and the obligations hereunder shall attach to the Covered Stock from the date hereof through the termination of this Agreement and shall be binding upon any Person to which legal or beneficial ownership of the Covered Stock shall pass, whether by operation of Law or otherwise, including the Holder’s heirs, guardians, administrators or successors, and the Holder further agrees to take all actions necessary to effectuate the foregoing. Any shares of Company Stock or any options, warrants or convertible securities (in each case, whether or not vested) to acquire shares of Company Stock received by the Holder in connection with any stock split, exchange of shares, stock dividend, reclassification, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Stock shall be deemed to be included as “Existing Stock” and “Covered Stock”, and this Agreement and the representations, warranties, covenants, agreements and obligations hereunder shall attach to any such additional Common Stock.

 

10.  Deposit. The Holder shall cause a counterpart of this Agreement to be deposited with the Company at its principal place of business or registered office where it shall be subject to the same right of examination by any stockholder, in person or by agent or attorney, as are the books and records of the Company.

 

11.  Public Disclosure. Except as contemplated by the Purchase Agreement or as otherwise required by Law, court order or regulatory authority, no disclosure (whether or not in response to an inquiry) of the subject matter of this Agreement or the Purchase Agreement shall be made prior to the Closing by or on behalf of the Holder (including any Representative of the Holder) (other than disclosures to managers, advisors or equity holders of the Holder on a need to know basis in connection with the approval of the Purchase Agreement and the transactions contemplated thereby) unless approved by Sellers prior to such disclosure. Notwithstanding the immediately preceding sentence, in the event that the Holder is required by Law or court order to make any such disclosure, the Holder may make such disclosure; provided that the Holder shall notify Sellers prior to making such disclosure, shall use its commercially reasonable efforts to give Sellers an opportunity (as is reasonable under the circumstances) to comment on such disclosure, and shall make only such disclosure as it is legally obligated to disclose. Solely to the extent required by applicable Law, the Holder hereby authorizes Parent , Sellers and the Company to publish and disclose in any announcement, filing or disclosure required by the SEC the Holder’s identity and ownership of the Covered Stock and the nature of the Holder’s obligations under this Agreement. The Holder agrees as promptly as practicable to give to Parent, Sellers and the Company any information that it may reasonably require for the preparation of any such announcement or disclosure documents and agrees to promptly notify Parent, Sellers and the Company of any required corrections with respect to any written information supplied by it specifically for use in any such disclosure document, if any, to the extent that any shall be or have become false or misleading, in any material respect.

 

12.  Remedies. The Holder acknowledges that money damages would be both incalculable and an insufficient remedy for any breach of this Agreement by it, and that any such breach would cause Sellers irreparable harm. Accordingly, the Holder agrees that in the event of any breach or threatened breach of this Agreement, Sellers, in addition to any other remedies at Law or in equity it may have, shall be entitled to seek immediate equitable relief, including injunctive relief and specific performance, without the necessity of proving the inadequacy of money damages as a remedy and without the necessity of posting any bond or other security, to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction.

 

 

13.  Notices. All notices, requests, consents, Claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been given (a) when delivered by hand; (b) when received by the addressee if sent by a nationally recognized overnight courier (receipt requested); (c) on the date sent by facsimile or e-mail of a PDF document (with confirmation of transmission) if sent during normal business hours of the recipient, and on the next Business Day if sent after normal business hours of the recipient or (d) on the third (3^rd) day after the date mailed, by certified or registered mail, return receipt requested, postage prepaid. Such communications must be sent to the respective Parties at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 13)

 

(i)  if to Sellers, to

 

Ribbon Communications Inc.

4 Technology Park Drive

Westford, Massachusetts 01886

Attention: Patrick Macken, EVP and Chief Legal Officer

E-Mail: [email protected]

 

with a copy to (which shall not constitute notice):

 

Latham & Watkins LLP

885 Third Avenue

New York, NY 10022-4834

Attention: David Allinson; Jane Greyf

E-Mail: [email protected]; [email protected]

 

(ii) if to the Holder, to the address set forth on Schedule A hereto.

 

14.  Severability. The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of any other provision of this Agreement in such jurisdiction, or the validity or enforceability of any provision of this Agreement in any other jurisdiction.

 

15.  Entire Agreement/Amendment. This Agreement and the Proxy represent the entire agreement of the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. Neither this Agreement nor the Proxy may be amended, modified, altered or supplemented except by means of a written instrument executed and delivered by the parties hereto.

 

16.  Governing Law. This Agreement and the Proxy shall be construed in accordance with, and governed in all respects by, the internal laws of the State of Delaware without regard to the Laws of such jurisdiction that would require the substantive Laws of another jurisdiction to apply. Unless otherwise explicitly provided in this Agreement, any action, claim, suit or proceeding relating to this Agreement or the Proxy or the enforcement of any provision of this Agreement or the Proxy shall be brought or otherwise commenced only in any state or federal court located in Delaware. Each party hereto (a) expressly and irrevocably consents and submits to the exclusive jurisdiction of the Delaware Court of Chancery (or in the event (but only in the event) that such court does not have subject matter jurisdiction over such action or proceeding, in the United States District Court for the District of Delaware) in any action arising out of or relating to this Agreement or any of the matters contemplated hereby; (b) agrees that each such court shall be deemed to be a convenient forum; (c) agrees that service of process in any such proceeding may be made by giving notice pursuant to Section 13; and (d) agrees not to assert, by way of motion, as a defense or otherwise, in any such proceeding commenced in any such court, any claim that such party is not subject personally to the jurisdiction of such court, that such proceeding has been brought in an inconvenient forum, that the venue of such proceeding is improper or that this Agreement or the Proxy or the subject matter of this Agreement or the Proxy may not be enforced in or by such court.

 

17.  Counterparts. For the convenience of the parties, this Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

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In Witness Whereof, the parties have caused this Agreement to be executed as of the date first above written.

 

	Holder:
	Stratos Management Systems Holdings, LLC
	By:	/s/ Lawrence E. Mock
	Name:	Lawrence E. Mock
	Title:	Managing Member
	Sellers:
	Ribbon Communications Operating Company, Inc.
	By:	/s/ Miguel Lopez
	Name:	Miguel Lopez
	Title:	President & Chief Executive Officer
	Ribbon Communications International Limited
	By:	/s/ Eric S. Marmurek
	Name:	Eric S. Marmurek
	Title:	Director
	Parent:
	Ribbon Communications Inc.
	By:	/s/ Bruce McClelland
	Name:	Bruce McClelland
	Title:	President & Chief Executive Officer

 

Signature Page to the Amended and Restated Voting Agreement

 

 

SCHEDULE A

 

Name and Address of Holder		Shares of Company Common Stock		PIPE Convertible Debentures		Company Warrants
Stratos Management Systems Holdings, LLC   c/o Navigation Capital Partners, Inc. 2870 Peachtree Road NW, Suite 509 Atlanta, GA 30305		8,306,721 shares of Common Stock		$20,000,000		2,000,000 PIPE unit warrants ($.01 strike price)

  

 

EXHIBIT A

Irrevocable Proxy

 

The undersigned holder (the “Holder”) of outstanding securities of American Virtual Cloud Technologies, Inc., a Delaware corporation (the “Company”), solely in its, his or her capacity as a holder of securities of the Company, hereby irrevocably appoints __________________, as the sole and exclusive attorney and proxy of the undersigned, with full power of substitution and resubstitution, to vote and exercise all voting, consent and similar rights with respect to all of the Covered Stock (as defined in the Voting Agreement, as defined below) until the Expiration Date (as defined below) as specified below. Upon the undersigned’s execution of this Proxy, any and all prior proxies given by the undersigned with respect to the Covered Stock are hereby revoked and the undersigned agrees not to grant any subsequent proxies with respect to the Covered Stock until after the Expiration Date.

 

This Proxy is irrevocable, is coupled with an interest sufficient in law to support an irrevocable power and made for the benefit of third parties, and is granted pursuant to that certain Voting Agreement (the “Voting Agreement”) of even date herewith by and among Ribbon Communications Operating Company, Inc., a Delaware corporation (“RCOCI”), Ribbon Communications International Limited, an Ireland company (“RCIL”, and together with RCOCI, each a “Seller” and collectively the “Sellers”) and the Holder, and is granted solely in furtherance of Holder’s undertaking to vote the Covered Stock as required by the Voting Agreement contemplated by that certain Purchase Agreement of even date herewith (the “Purchase Agreement”), by and among the Company, the Sellers and Ribbon Communications Inc., a Delaware corporation. As used herein, the term “Expiration Date” shall mean the date of termination of the Voting Agreement in accordance with its terms. Capitalized terms used but not defined herein have the meaning attributed to them in the Purchase Agreement.

 

The attorney and proxy named above is hereby authorized and empowered by the Holder, at any time prior to the Expiration Date, to act as the Holder’s attorney and proxy to vote the Covered Stock and to exercise all voting, consent and similar rights of the Holder with respect to the Covered Stock (including, without limitation, the power to execute and deliver written consents), in accordance with Section 2 of the Voting Agreement, at any meeting of stockholders of the Company or at any adjournment thereof, in any action by written consent or in any other circumstances upon which the Holder’s vote, consent or other approval is sought in connection with the Purchase Agreement and the issuance of Common Stock to Parent upon the conversion of the Debentures issuable to Parent pursuant to the Purchase Agreement and the exercise of the Warrants issuable to Parent pursuant to the Purchase Agreement.

   

Any obligation of the Holder hereunder shall be binding upon the successors and assigns of the Holder.

 

This Proxy shall terminate, and be of no further force or effect, automatically upon the Expiration Date.

 

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	Holder
	Stratos Management Systems Holdings, LLC
	By:
	Name:
	Title:
	Dated: _________ ___, 2020

 

 

 

 

Exhibit 10.4

 

EXECUTION VERSION

 

INVESTOR RIGHTS AGREEMENT

 

THIS INVESTOR RIGHTS AGREEMENT (this “Agreement”), dated as of December 1, 2020, is made and entered into by and among American Virtual Cloud Technologies, Inc., a Delaware corporation (the “Company”),the undersigned party listed under the heading “Holder” on the signature page hereto (and, together with any person or entity who hereafter becomes a party to this Agreement pursuant to Section 6.2 of this Agreement, each a “Holder” and collectively the “Holders”), and solely for purposes of Section 7.1 of this Agreement, the undersigned parties listed under the heading “Significant Holders” on the signature page hereto (collectively, the “Significant Holders”).

 

RECITALS

 

WHEREAS, the Company, Holder, Ribbon Communications Operating Company, Inc., a Delaware corporation (“RCOCI”), and Ribbon Communications International Limited, an Ireland company (“RCIL”, and together with RCOCI, each a “Seller” and collectively the “Sellers”) are parties to that certain Amended and Restated Purchase Agreement dated December 1, 2020 (the “Purchase Agreement”; capitalized terms used and not otherwise defined herein shall have the meanings given to them in the Purchase Agreement);

 

WHEREAS, pursuant to the Purchase Agreement, the Sellers and their respective Affiliate are selling the Business by selling the Transferred Assets and all of the membership interests of Kandy Communications LLC (the “Purchased Interests”) and assigning the Assumed Liabilities to the Company;

 

WHEREAS, the purchase price to be paid by the Company to the Sellers in consideration for all of Sellers’ and/or their respective Affiliates’ right, title and interest in, to and under the Transferred Assets and the Purchased Interests will be the issuance of the Consideration Units to Holder, which Consideration Units shall consist of Debentures and Warrants;

 

WHEREAS, the Company will issue Common Stock to Holder upon the conversion of the Debentures issuable to Holder pursuant to the Purchase Agreement and the exercise of the Warrants issuable to Holder pursuant to the Purchase Agreement (collectively, the “Conversion Shares”); and

 

WHEREAS, in order to induce the Sellers to accept the Consideration Units, Holder and the Company hereby agree that this Agreement shall govern the right of the Holder to appoint the Ribbon Director (as defined below), the right of Holder to participate in future equity offerings by the Company, and certain other matters as set forth in this Agreement.

 

NOW, THEREFORE, for and in consideration of the mutual premises and other consideration, the receipt and sufficiency of which is acknowledged, the parties hereto hereby agree as follows:

 

1. DEFINITIONS. The following capitalized terms used herein have the following meanings:

 

“Adverse Disclosure” is defined in Section 3.6.

 

 

“Agreement” is defined in the preamble hereto.

 

“Business Day” means a day other than Saturday, Sunday or other day on which commercial banks in New York, New York or in Texas generally are authorized or required by law to close. If any period expires on a day which is not a Business Day or any event or condition is required by the terms of this Agreement to occur or be fulfilled on a day which is not a Business Day, such period shall expire or such event or condition shall occur or be fulfilled, as the case may be, on the next succeeding Business Day.

 

“Commission” means the Securities and Exchange Commission, or any other federal agency then administering the Securities Act or the Exchange Act.

 

“Common Stock” means shares of the Company’s common stock, par value $0.0001 per share.

 

“Company” is defined in the preamble to this Agreement.

 

“Demand Registration” is defined in Section 2.2.1.

 

“Demanding Holder” is defined in Section 2.2.1.

 

“Effectiveness Period” is defined in Section 3.1.3.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.

 

“Final Closing” has the meaning ascribed to such term in the NCP Subscription Agreement.

 

“Form S-3” is defined in Section 2.1.

 

“Holder Indemnified Party” is defined in Section 4.1.

 

“Holders” is defined in the preamble to this Agreement.

 

“Indemnified Party” is defined in Section 4.3.

 

“Indemnifying Party” is defined in Section 4.3.

 

“Initial Closing” has the meaning ascribed to such term in the NCP Subscription Agreement.

 

“Maximum Number of Shares” is defined in Section 2.2.4.

 

“Misstatement” is defined in Section 3.1.13.

 

“New Registration Statement” is defined in Section 2.1.4.

 

 

“Notices” is defined in Section 8.3.

 

“Piggy-Back Registration” is defined in Section 2.3.1.

 

“Pro Rata” is defined in Section 2.2.4.

 

“Redeemable Units” is defined in Section 6.3.

 

“Redemption Closing” is defined in Section 6.3.

 

“Redemption Notice” is defined in Section 6.3.

 

“Redemption Price” is defined in Section 6.3.

 

“Register,” “Registered” and “Registration” mean a registration effected by preparing and filing a Registration Statement or similar document in compliance with the requirements of the Securities Act, and the applicable rules and regulations promulgated thereunder, and such Registration Statement becoming effective.

 

“Registrable Securities” means (i) shares of Common Stock held by any Holder as of the date hereof; (ii) any shares of Common Stock, or any Common Stock issued or issuable (directly or indirectly) upon conversion and/or exercise of any other securities of the Company acquired by any Holder on or after the date hereof, including shares of Common Stock held by any Holder as of the date hereof or issuable pursuant to the conversion of the Debentures and the exercise of the Warrants held by any Holder; and (iii) any shares of Common Stock issued pursuant to any stock split or combination or as (or issuable upon the conversion or exercise of any option, warrant, right, or other security that is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the shares referenced in the immediately preceding clauses (i) or (ii) above (including, for the avoidance of doubt, the Conversion Shares). As to any particular Registrable Securities, such securities shall cease to be Registrable Securities when: (a) a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (b) such securities shall have been otherwise transferred; provided, that new certificates for them not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent public distribution of them shall not require registration under the Securities Act; (c) such securities shall have ceased to be outstanding; or (d) such securities are freely saleable under Rule 144 without volume or manner of sale limitations (it being understood that the Registrable Securities will remain “Registrable Securities” for the three (3) months following the date on which any Holder ceases to be an “affiliate” of the Company).

 

“Registration Statement” means a registration statement filed by the Company with the Commission in compliance with the Securities Act and the rules and regulations promulgated thereunder for a public offering and sale of Common Stock (other than a registration (i) pursuant to a Registration Statement on Form S-8 (or other registration solely relating to an offering or sale to employees or directors of the Company pursuant to any employee stock option or other benefit plan), (ii) pursuant to a Registration Statement on Form S-4 for an exchange offer or offering of securities solely to the Company’s existing stockholders (or similar transaction subject to Rule 145 under the Securities Act or any successor rule thereto), or (iii) for a dividend reinvestment plan).

 

 

“Regulatory Filing” is defined in Section 6.4.

 

“Resale Shelf Registration Statement” is defined in Section 2.1.1.

 

“Requesting Holder” is defined in Section 2.1.5(a).

 

“Rule 144” means Rule 144 promulgated under the Securities Act or any successor rule thereto.

 

“SEC Guidance” is defined in Section 2.1.4.

 

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time (or any successor statute and related rules and regulations).

 

“Selling Holders” is defined in Section 2.1.5(a)(ii).

 

“Termination Date” is defined in Section 6.3.

 

“Underwriter” means a securities dealer who purchases any Registrable Securities as principal in an underwritten offering and not as part of such dealer’s market-making activities.

 

“Underwritten Takedown” shall mean an underwritten public offering of Registrable Securities pursuant to the Resale Shelf Registration Statement, as amended or supplemented.

 

2. REGISTRATION RIGHTS.

 

2.1 Resale Shelf Registration Rights.

 

2.1.1 Registration Statement Covering Resale of Registrable Securities. The Company shall prepare and file or cause to be prepared and filed with the Commission, no later than twenty (20) days following the date of this Agreement, a Registration Statement for an offering to be made on a continuous basis pursuant to Rule 415 of the Securities Act registering the resale from time to time by Holders of all of the Registrable Securities held by Holders (the “Resale Shelf Registration Statement”). The Resale Shelf Registration Statement shall be on Form S-3 (“Form S-3”), or, if the Company is not then eligible to file on Form S-3, on Form S-1 or any other appropriate form under the Securities Act, or any successor rule that may be adopted by the SEC. The Company shall use reasonable best efforts to cause the Resale Shelf Registration Statement to be declared effective as soon as possible after filing, and once effective, to keep the Resale Shelf Registration Statement continuously current and effective under the Securities Act (or file a new Resale Shelf Registration Statement when the preceding Resale Shelf Registration Statement expires pursuant to the rules of the SEC) at all times until the expiration of the Effectiveness Period.

 

 

2.1.2 Notification and Distribution of Materials. The Company shall notify the Holders in writing of the effectiveness of the Resale Shelf Registration Statement in accordance with Section 3.1.4 hereof and shall furnish to them, without charge, such number of copies of the Resale Shelf Registration Statement (including any amendments, supplements and exhibits), the prospectus contained therein (including each preliminary prospectus and all related amendments and supplements) and any documents incorporated by reference in the Resale Shelf Registration Statement or such other documents as the Holders may reasonably request in order to facilitate the sale of the Registrable Securities in the manner described in the Resale Shelf Registration Statement.

 

2.1.3 Amendments and Supplements. Subject to the provisions of Section 2.1.1 above, the Company shall promptly prepare and file with the Commission from time to time such amendments and supplements to the Resale Shelf Registration Statement and prospectus used in connection therewith (or file a new Resale Shelf Registration Statement when the preceding Resale Shelf Registration Statement expires pursuant to the rules of the SEC) as may be necessary to keep the Resale Shelf Registration Statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all the Registrable Securities during the Effectiveness Period.

 

2.1.4 Notwithstanding the registration obligations set forth in this Section 2.1, in the event the Commission informs the Company that all of the Registrable Securities cannot, as a result of the application of Rule 415, be registered for resale as a secondary offering on a single registration statement, the Company agrees to promptly (i) inform each of the Holders thereof and use its commercially reasonable efforts to file amendments to the Resale Shelf Registration Statement as required by the Commission and/or (ii) withdraw the Resale Shelf Registration Statement and file a new registration statement (a “New Registration Statement”), in either case covering the maximum number of Registrable Securities permitted to be registered by the Commission, on Form S-3 or such other form available to register for resale the Registrable Securities as a secondary offering; provided, however, that prior to filing such amendment or New Registration Statement, the Company shall be obligated to use its commercially reasonable efforts to advocate with the Commission for the registration of all of the Registrable Securities in accordance with any publicly-available written or oral guidance, comments, requirements or requests of the Commission staff (the “SEC Guidance”). Notwithstanding any other provision of this Agreement, if any SEC Guidance sets forth a limitation of the number of Registrable Securities permitted to be registered on a particular Registration Statement as a secondary offering (and notwithstanding that the Company used diligent efforts to advocate with the Commission for the registration of all or a greater number of Registrable Securities), unless otherwise directed in writing by a Holder as to its Registrable Securities, the number of Registrable Securities to be registered on such Registration Statement will be reduced on a pro rata basis based on the total number of Registrable Securities held by the Holders, subject to a determination by the Commission that certain Holders must be reduced first based on the number of Registrable Securities held by such Holders. In the event the Company amends the Resale Shelf Registration Statement or files a New Registration Statement, as the case may be, under clauses (i) or (ii) above, the Company will use its commercially reasonable efforts to file with the Commission, as promptly as allowed by Commission or SEC Guidance provided to the Company or to registrants of securities in general, one or more registration statements on Form S-3 or such other form available to register for resale those Registrable Securities that were not registered for resale on the Resale Shelf Registration Statement, as amended, or the New Registration Statement.

 

 

2.1.5 Notice of Certain Events. The Company shall promptly notify the Holders in writing of any request by the Commission for any amendment or supplement to, or additional information in connection with, the Resale Shelf Registration Statement required to be prepared and filed hereunder (or prospectus relating thereto). The Company shall promptly notify each Holder in writing of the filing of the Resale Shelf Registration Statement or any prospectus, amendment or supplement related thereto or any post-effective amendment to the Resale Shelf Registration Statement and the effectiveness of any post-effective amendment.

 

(a) If the Company shall receive a request from the Holders of Registrable Securities, provided that the aggregate estimated market value of the Registrable Securities is at least $5,000,000 (the requesting Holder(s) shall be referred to herein as the “Requesting Holder”) that the Company effect the Underwritten Takedown of all or any portion of the Requesting Holder’s Registrable Securities, and specifying the intended method of disposition thereof, then the Company shall promptly give notice of such requested Underwritten Takedown (each such request shall be referred to herein as a “Demand Takedown”) at least ten (10) Business Days prior to the anticipated filing date of the prospectus or supplement relating to such Demand Takedown to the non-Requesting Holders and thereupon shall use its reasonable best efforts to effect, as expeditiously as possible, the offering in such Underwritten Takedown of:

 

(i) subject to the restrictions set forth in Section 2.2.4, all Registrable Securities for which the Requesting Holder has requested such offering under Section 2.1.5(a), and

 

(ii) subject to the restrictions set forth in Section 2.2.4, all other Registrable Securities that any non-Requesting Holders of Registrable Securities (all such Holders, together with the Requesting Holder, the “Selling Holders”) have requested the Company to offer by request received by the Company within seven (7) Business Days after such non-Requesting Holders receive the Company’s notice of the Demand Takedown, all to the extent necessary to permit the disposition (in accordance with the intended methods thereof as aforesaid) of the Registrable Securities so to be offered.

 

(b) Promptly after the expiration of the seven-Business Day-period referred to in Section 2.1.5(a)(ii), the Company will notify all Selling Holders of the identities of the other Selling Holders and the number of shares of Registrable Securities requested to be included therein.

 

(c) The Company shall only be required to effectuate one Underwritten Takedown within any six-month period.

 

(d) If the managing underwriter in an Underwritten Takedown advises the Company and the Selling Holders that, in its view, the number of shares of Registrable Securities requested to be included in such underwritten offering exceeds the largest number of shares that can be sold without having an adverse effect on such offering, including the price at which such shares can be sold, the shares included in such Underwritten Takedown will be reduced by the Registrable Securities held by the Selling Holders (applied on a pro rata basis based on the total number of Registrable Securities held by such Selling Holders, subject to a determination by the Commission that certain Holders must be reduced first based on the number of Registrable Securities held by such Holders).

 

 

2.1.6 Selection of Underwriters. Selling Holders holding a majority in interest of the Registrable Securities requested to be sold in an Underwritten Takedown shall have the right to select an Underwriter or Underwriters in connection with such Underwritten Takedown, which Underwriter or Underwriters shall be reasonably acceptable to the Company (not to be unreasonably withheld, conditioned or delayed). In connection with an Underwritten Takedown, the Company shall enter into customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of the Registrable Securities in such Underwritten Takedown, including, if necessary, the engagement of a “qualified independent underwriter” in connection with the qualification of the underwriting arrangements with the Financial Industry Regulatory Authority, Inc.

 

2.1.7 Registrations effected pursuant to this Section 2.1 shall not be counted as Demand Registrations effected pursuant to Section 2.2.

 

2.2 Demand Registration.

 

2.2.1 Request for Registration. At any time and from time to time on or after (i) the date hereof with respect to the Registrable Securities, the Holder (the “Demanding Holder”) may make a written demand for Registration under the Securities Act of all or part of its Registrable Securities (a “Demand Registration”). Any demand for a Demand Registration shall specify the number of Registrable Securities proposed to be sold and the intended method(s) of distribution thereof. The Company will within ten (10) days of the Company’s receipt of the Demand Registration notify all Holders of Registrable Securities of the demand, and each Holder of Registrable Securities who wishes to include all or a portion of such Holder’s Registrable Securities in the Demand Registration shall so notify the Company within ten (10) days after the receipt by the Holder of the notice from the Company. Upon any such request, the Demanding Holders shall be entitled to have their Registrable Securities included in the Demand Registration, subject to Section 2.2.4 and the provisos set forth in Section 3.1.1. The Company shall not be obligated to effect more than an aggregate of three (3) Demand Registrations under this Section 2.2.1.

 

2.2.2 Effective Registration. A Registration will not count as a Demand Registration until the Registration Statement filed with the Commission with respect to such Demand Registration has been declared effective and the Company has complied with all of its obligations under this Agreement with respect thereto; provided, however, that if, after such Registration Statement has been declared effective, the offering of Registrable Securities pursuant to a Demand Registration is interfered with by any stop order or injunction of the Commission or any other governmental agency or court, the Registration Statement with respect to such Demand Registration will be deemed not to have been declared effective, unless and until, (i) such stop order or injunction is removed, rescinded or otherwise terminated, and (ii) a majority-in-interest of the Demanding Holders who initiated such Demand Registration thereafter affirmatively elect to continue the offering and notify the Company in writing, but in no event later than five (5) days of such election; provided, further, that the Company shall not be obligated to file a second Registration Statement until a Registration Statement that has been filed is counted as a Demand Registration or is terminated.

 

 

2.2.3 Underwritten Offering. If a majority-in-interest of the other Demanding Holders who initiate a Demand Registration so elect and such Holders so advise the Company as part of their written demand for a Demand Registration, the offering of such Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering. In such event, the right of any Holder to include its Registrable Securities in such Registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Demanding Holders proposing to distribute their securities through such underwriting shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such underwriting by a majority-in-interest of the Holders initiating the Demand Registration.

 

2.2.4 Reduction of Offering. If the managing Underwriter or Underwriters for a Demand Registration that is to be an underwritten offering, in good faith, advises the Company and the Demanding Holders in writing that the dollar amount or number of shares of Registrable Securities which the Demanding Holders desire to sell, taken together with all other shares of Common Stock or other securities which the Company desires to sell and the shares of Common Stock, if any, as to which Registration has been requested pursuant to written contractual piggy-back registration rights held by other stockholders of the Company who desire to sell, exceeds the maximum dollar amount or maximum number of shares that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of shares, as applicable, the “Maximum Number of Shares”), then the Company shall include in such Registration: (i) the Registrable Securities as to which Demand Registration has been requested by the Demanding Holders (pro rata in accordance with the number of shares that each such Demanding Holder has requested be included in such Registration, regardless of the number of shares held by each such Demanding Holder (such proportion is referred to herein as “Pro Rata”)) that can be sold without exceeding the Maximum Number of Shares; (ii) to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (i), the Registrable Securities of Holders exercising their rights to Register their Registrable Securities pursuant to Section 2.3; (iii) to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i) and (ii), the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (iv) to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (i), (ii) and (iii), the shares of Common Stock or other securities for the account of other persons that the Company is obligated to Register pursuant to written contractual arrangements with such persons and that can be sold without exceeding the Maximum Number of Shares.

 

2.2.5 Withdrawal. If a majority-in-interest of the Demanding Holders disapprove of the terms of any underwriting or are not entitled to include all of their Registrable Securities in any offering, such majority-in-interest of the Demanding Holders may elect to withdraw from such offering by giving written notice to the Company and the Underwriter or Underwriters of their request to withdraw prior to the effectiveness of the Registration Statement filed with the Commission with respect to such Demand Registration. If the majority-in-interest of the Demanding Holders withdraws from a proposed offering relating to a Demand Registration, then such Registration shall not count as a Demand Registration provided for in this Section 2.2.

 

 

2.3 Piggy-Back Registration.

 

2.3.1 Piggy-Back Rights. If at any time on or after the date hereof the Company proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities, or securities or other obligations exercisable or exchangeable for, or convertible into, equity securities, by the Company for its own account or for stockholders of the Company for their account (or by the Company and by stockholders of the Company including, without limitation, pursuant to Section 2.2), other than a registration (i) pursuant to a Registration Statement on Form S-8 (or other registration solely relating to an offering or sale to employees or directors of the Company pursuant to any employee stock option or other benefit plan), (ii) pursuant to a Registration Statement on Form S-4 for an exchange offer or offering of securities solely to the Company’s existing stockholders (or similar transaction subject to Rule 145 under the Securities Act or any successor rule thereto), or (iii) for a dividend reinvestment plan, then the Company shall (x) give written notice of such proposed filing to the Holders of Registrable Securities as soon as practicable but in no event less than ten (10) days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing Underwriter or Underwriters, if any, of the offering, and (y) offer to the Holders of Registrable Securities in such notice the opportunity to Register the sale of such number of shares of Registrable Securities as such Holders may request in writing within five (5) days following receipt of such notice (a “Piggy-Back Registration”). The Company shall, in good faith, cause such Registrable Securities to be included in such Registration and shall use its reasonable best efforts to cause the managing Underwriter or Underwriters of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Company and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof. All Holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an Underwriter or Underwriters shall enter into an underwriting agreement in customary form with the Underwriter or Underwriters selected for such Piggy-Back Registration.

 

2.3.2 Reduction of Offering. If the managing Underwriter or Underwriters for a Piggy-Back Registration that is to be an underwritten offering advises the Company and the Holders of Registrable Securities in writing that the dollar amount or number of shares of Common Stock which the Company desires to sell, taken together with shares of Common Stock, if any, as to which Registration has been demanded pursuant to separate written contractual arrangements with persons or entities other than the Holders of Registrable Securities hereunder, the Registrable Securities as to which Registration has been requested under this Section 2.3, and the shares of Common Stock, if any, as to which Registration has been requested pursuant to the written contractual Piggy-Back Registration rights of other stockholders of the Company, exceeds the Maximum Number of Shares, then the Company shall include in any such Registration:

 

(a) If the Registration is undertaken for the Company’s account: (A) the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (B) to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (A), the shares of Common Stock or other securities, if any, comprised of Registrable Securities, as to which Registration has been requested pursuant to the applicable written contractual Piggy-Back Registration rights of such security Holders, Pro Rata, that can be sold without exceeding the Maximum Number of Shares; and (C) to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A) and (B), the shares of Common Stock or other securities for the account of other persons that the Company is obligated to Register pursuant to written contractual Piggy-Back Registration rights with such persons and that can be sold without exceeding the Maximum Number of Shares; and

 

 

(b) If the Registration is a “demand” registration undertaken at the demand of persons or entities other than the Holders of Registrable Securities, (A) the shares of Common Stock or other securities for the account of the demanding persons that can be sold without exceeding the Maximum Number of Shares; (B) to the extent that the Maximum Number of Shares has not been reached under the foregoing clause (A), the shares of Common Stock or other securities that the Company desires to sell that can be sold without exceeding the Maximum Number of Shares; (C) to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A) and (B), the shares of Common Stock or other securities comprised of Registrable Securities, Pro Rata, as to which Registration has been requested pursuant to the terms hereof and the Unit Purchase Option, as applicable, that can be sold without exceeding the Maximum Number of Shares; and (D) to the extent that the Maximum Number of Shares has not been reached under the foregoing clauses (A), (B) and (C), the shares of Common Stock or other securities for the account of other persons that the Company is obligated to Register pursuant to written contractual arrangements with such persons, that can be sold without exceeding the Maximum Number of Shares.

 

2.3.3 Withdrawal. Any Holder of Registrable Securities may elect to withdraw such Holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Company of such request to withdraw prior to the effectiveness of the Registration Statement. The Company (whether on its own determination or as the result of a withdrawal by persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of the Registration Statement. Notwithstanding any such withdrawal, the Company shall pay all expenses incurred by the Holders of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 3.3.

 

2.3.4 Unlimited Piggy-Back Registration Rights. For purposes of clarity, any Registration effected pursuant to Section 2.3 hereof shall not be counted as a Registration pursuant to a Demand Registration effected under Section 2.2 hereof.

 

 

3. REGISTRATION PROCEDURES.

 

3.1 Filings; Information. Whenever the Company is required to effect the Registration of any Registrable Securities pursuant to Section 2, the Company shall use its best efforts to effect the Registration and sale of such Registrable Securities in accordance with the intended method(s) of distribution thereof as expeditiously as practicable, and in connection with any such request:

 

3.1.1 Filing Registration Statement. The Company shall, as expeditiously as possible and in any event within twenty (20) days after receipt of a request for a Demand Registration pursuant to Section 2.1, prepare and file with the Commission a Registration Statement on any form for which the Company then qualifies or which counsel for the Company shall deem appropriate and which form shall be available for the sale of all Registrable Securities to be Registered thereunder in accordance with the intended method(s) of distribution thereof, and shall use its best efforts to cause such Registration Statement to become and remain effective for the period required by Section 3.1.3; provided, however, that the Company shall have the right to defer any Demand Registration for up to sixty (60) days, and any Piggy-Back Registration for such period as may be applicable to deferment of any Demand Registration to which such Piggy-Back Registration relates, in each case if the Company shall furnish to the Holders a certificate signed by the Chairman of the Board of Directors or President of the Company stating that Adverse Disclosure (as defined below) would be required to be set forth in such Registration Statement; provided further, however, that the Company shall not have the right to exercise the right set forth in the immediately preceding proviso more than twice in any 365-day period in respect of a Demand Registration hereunder.

 

3.1.2 Copies. The Company shall, prior to filing a Registration Statement or prospectus, or any amendment or supplement thereto, furnish without charge to the Holders of Registrable Securities included in such Registration, and such Holders’ legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the prospectus included in such Registration Statement (including each preliminary prospectus), and such other documents as the Holders of Registrable Securities included in such Registration or legal counsel for any such Holders may request in order to facilitate the disposition of the Registrable Securities owned by such Holders.

 

3.1.3 Amendments and Supplements. The Company shall prepare and file with the Commission such amendments, including post-effective amendments, and supplements to such Registration Statement and the prospectus used in connection therewith (or file a new Registration Statement when the preceding Registration Statement expires pursuant to the rules of the SEC) as may be necessary to keep such Registration Statement effective and in compliance with the provisions of the Securities Act until all Registrable Securities and other securities covered by such Registration Statement have been disposed of in accordance with the intended method(s) of distribution set forth in such Registration Statement or such securities have been withdrawn (the “Effectiveness Period”).

 

 

3.1.4 Notification. After the filing of a Registration Statement, the Company shall promptly, and in no event more than two (2) Business Days after such filing, notify the Holders of Registrable Securities included in such Registration Statement of such filing, and shall further notify such Holders promptly and confirm such advice in writing in all events within two (2) Business Days of the occurrence of any of the following: (i) when such Registration Statement becomes effective; (ii) when any post-effective amendment to such Registration Statement becomes effective; (iii) the issuance or threatened issuance by the Commission of any stop order (and the Company shall take all actions required to prevent the entry of such stop order or to remove it if entered); and (iv) any request by the Commission for any amendment or supplement to such Registration Statement or any prospectus relating thereto or for additional information or of the occurrence of an event requiring the preparation of a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of the securities covered by such Registration Statement, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and promptly make available to the Holders of Registrable Securities included in such Registration Statement any such supplement or amendment; except that before filing with the Commission a Registration Statement or prospectus or any amendment or supplement thereto, including documents incorporated by reference, the Company shall furnish to the Holders of Registrable Securities included in such Registration Statement and to the legal counsel for any such Holders, copies of all such documents proposed to be filed sufficiently in advance of filing to provide such Holders and legal counsel with a reasonable opportunity to review such documents and comment thereon, and the Company shall not file any Registration Statement or prospectus or amendment or supplement thereto, including documents incorporated by reference, to which such Holders or their legal counsel shall reasonably object.

 

3.1.5 Securities Laws Compliance. The Company shall use its reasonable best efforts to (i) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may request and (ii) take such action necessary to cause such Registrable Securities covered by the Registration Statement to be Registered with or approved by such other governmental authorities or securities exchanges, including the Nasdaq Capital Market, as may be necessary by virtue of the business and operations of the Company and do any and all other acts and things that may be necessary or advisable to enable the Holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however, that the Company shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph or subject itself to taxation in any such jurisdiction.

 

3.1.6 Agreements for Disposition. The Company shall enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities. The representations, warranties and covenants of the Company in any underwriting agreement which are made to or for the benefit of any Underwriters, to the extent applicable, shall also be made to and for the benefit of the Holders of Registrable Securities included in such Registration Statement. No Holder of Registrable Securities included in such Registration Statement shall be required to make any representations or warranties in the underwriting agreement except as reasonably requested by the underwriters and, if applicable, with respect to such Holder’s organization, good standing, authority, title to Registrable Securities, lack of conflict of such sale with such Holder’s organizational documents, and with respect to written information relating to such Holder that such Holder has furnished in writing expressly for inclusion in such Registration Statement.

 

 

3.1.7 Cooperation. The principal executive officer of the Company, the principal financial officer of the Company, the principal accounting officer of the Company and all other officers and members of the management of the Company shall cooperate fully in any offering of Registrable Securities hereunder, which cooperation shall include, without limitation, the preparation of the Registration Statement with respect to such offering and all other offering materials and related documents, and participation in meetings with Underwriters, attorneys, accountants and potential investors.

 

3.1.8 Records. The Company shall make available for inspection by the Holders of Registrable Securities included in such Registration Statement, any Underwriter participating in any disposition pursuant to such Registration Statement and any attorney, accountant or other professional retained by any Holder of Registrable Securities included in such Registration Statement or any Underwriter, all financial and other records, pertinent corporate documents and properties of the Company, as shall be necessary to enable them to exercise their due diligence responsibility, and cause the Company’s officers, directors and employees to supply all information requested by any of them in connection with such Registration Statement.

 

3.1.9 Opinions and Comfort Letters. The Company shall furnish to each Holder of Registrable Securities included in any Registration Statement a signed counterpart, addressed to such Holder, of (i) any opinion of counsel to the Company delivered to any Underwriter and (ii) any comfort letter from the Company’s independent public accountants delivered to any Underwriter. In the event no legal opinion is delivered to any Underwriter, the Company shall furnish to each Holder of Registrable Securities included in such Registration Statement, at any time that such Holder elects to use a prospectus, an opinion of counsel to the Company to the effect that the Registration Statement containing such prospectus has been declared effective and that no stop order is in effect.

 

3.1.10 Earnings Statement. The Company shall comply with all applicable rules and regulations of the Commission and the Securities Act, and make available to its stockholders, as soon as reasonably practicable, an earnings statement covering a period of twelve (12) months, beginning within three (3) months after the effective date of the Registration Statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

3.1.11 Listing. The Company shall use its best efforts to cause all Registrable Securities included in any Registration to be listed on such exchanges or otherwise designated for trading in the same manner as similar securities issued by the Company are then listed or designated or, if no such similar securities are then listed or designated, in a manner satisfactory to the Holders of a majority of the Registrable Securities included in such Registration. From and after the date of this Agreement, the Company shall use reasonable best efforts to cause the Conversion Shares to be approved for listing on the Nasdaq and to deliver evidence to the Holder, in form and substance reasonably satisfactory to Holder that, the Conversion Shares have been authorized for listing on the Nasdaq.

 

3.1.12 Transfer Agent. The Company shall provide a transfer agent or warrant agent, as applicable, and registrar for all such Registrable Securities no later than the effective date of the Registration Statement.

 

 

3.1.13 Misstatements. The Company shall notify the Holders at any time when a prospectus relating to such Registration Statement is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or an omission to state a material fact required to be stated in a Registration Statement or prospectus, or necessary to make the statements therein in the light of the circumstances under which they were made not misleading (a “Misstatement”), and then to correct such Misstatement.

 

3.2 Obligation to Suspend Distribution. Upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3.1.4(iv), or, in the case of a resale Registration on Form S-3 pursuant to Section 2.3 hereof, upon any suspension by the Company, pursuant to a written insider trading compliance program adopted by the Company’s Board of Directors, of the ability of all “insiders” covered by such program to transact in the Company’s securities because of the existence of material non-public information, each Holder of Registrable Securities included in any Registration shall immediately discontinue disposition of such Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Holder receives the supplemented or amended prospectus contemplated by Section 3.1.4(iv) or the restriction on the ability of “insiders” to transact in the Company’s securities is removed, as applicable, and, if so directed by the Company, each such Holder will deliver to the Company all copies, other than permanent file copies then in such Holder’s possession, of the most recent prospectus covering such Registrable Securities at the time of receipt of such notice.

 

3.3 Registration Expenses. The Company shall bear all costs and expenses incurred in connection with the Resale Shelf Registration Statement pursuant to Section 2.1, any Demand Registration pursuant to Section 2.2, and any Piggy-Back Registration pursuant to Section 2.3, and all expenses incurred in performing or complying with its other obligations under this Agreement, whether or not the Registration Statement becomes effective, including, without limitation: (i) all Registration and filing fees and fees of any securities exchange on which the Common Stock is then listed; (ii) fees and expenses of compliance with securities or “blue sky” laws (including fees and disbursements of counsel for the Underwriters in connection with blue sky qualifications of the Registrable Securities); (iii) printing, messenger, telephone and delivery expenses; (iv) the Company’s internal expenses (including, without limitation, all salaries and expenses of its officers and employees); (v) the fees and expenses incurred in connection with the listing of the Registrable Securities as required by Section 3.1.11; (vi) Financial Industry Regulatory Authority fees; (vii) fees and disbursements of counsel for the Company and fees and expenses for independent certified public accountants retained by the Company (including, without limitation, the expenses or costs associated with the delivery of any opinions or comfort letters requested pursuant to Section 3.1.9); (viii) the fees and expenses of any special experts retained by the Company in connection with such Registration; (ix) the fees and expenses of one legal counsel selected by the Holders of a majority-in-interest of the Registrable Securities included in such Registration; and (x) any other fees and disbursement customarily paid by the issuers of securities. The Company shall have no obligation to pay any underwriting discounts or selling commissions attributable to the Registrable Securities being sold by the Holders thereof, which underwriting discounts or selling commissions shall be borne by such Holders. Additionally, in an underwritten offering, all selling stockholders and the Company shall bear the expenses of the underwriter pro rata in proportion to the respective amount of shares each is selling in such offering.

 

 

3.4 Information. The Holders of Registrable Securities shall provide such information as may reasonably be requested by the Company, or the managing Underwriter, if any, in connection with the preparation of any Registration Statement, including amendments and supplements thereto, in order to effect the Registration of any Registrable Securities under the Securities Act pursuant to Section 2 and in connection with the Company’s obligation to comply with federal and applicable state securities laws.

 

3.5 Requirements for Participation in Underwritten Offerings. No Person may participate in any underwritten offering for equity securities of the Company pursuant to a Registration initiated by the Company hereunder unless such Person (i) agrees to sell such Person’s securities on the basis provided in any underwriting arrangements approved by the Company and (ii) completes and executes all customary questionnaires, powers of attorney, indemnities, lock-up agreements, underwriting agreements and other customary documents as may be reasonably required under the terms of such underwriting arrangements.

 

3.6 Suspension of Sales; Adverse Disclosure. Upon receipt of written notice from the Company that a Registration Statement or prospectus contains a Misstatement, each of the Holders shall forthwith discontinue disposition of Registrable Securities until it has received copies of a supplemented or amended prospectus correcting the Misstatement (it being understood that the Company hereby covenants to prepare and file such supplement or amendment as soon as practicable after the time of such notice), or until it is advised in writing by the Company that the use of the prospectus may be resumed. If the filing, initial effectiveness or continued use of a Registration Statement in respect of any Registration at any time would require the Company to make an Adverse Disclosure (as defined below) or would require the inclusion in such Registration Statement of financial statements that are unavailable to the Company for reasons beyond the Company’s control, the Company may, upon giving prompt written notice of such action to the Holders, delay the filing or initial effectiveness of, or suspend use of, such Registration Statement for the shortest period of time, but in no event more than thirty (30) days, determined in good faith by the Company to be necessary for such purpose. In the event the Company exercises its rights under the preceding sentence, the Holders agree to suspend, immediately upon their receipt of the notice referred to above, their use of the prospectus relating to any Registration in connection with any sale or offer to sell Registrable Securities. The Company shall immediately notify the Holders of the expiration of any period during which it exercised its rights under this Section 3.6. “Adverse Disclosure” shall mean any public disclosure of material non-public information, which disclosure, in the good faith judgment of the principal executive officer or principal financial officer of the Company, after consultation with counsel to the Company, (i) would be required to be made in any Registration statement or prospectus in order for the applicable Registration statement or prospectus not to contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained therein (in the case of any prospectus and any preliminary prospectus, in the light of the circumstances under which they were made) not misleading, (ii) would not be required to be made at such time if the Registration Statement were not being filed, and (iii) the Company has a bona fide business purpose for not making such information public.

 

 

3.7 Reporting Obligations. As long as any Holder shall own Registrable Securities, the Company, at all times while it shall be reporting under the Exchange Act, covenants to file timely (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to Sections 13(a) or 15(d) of the Exchange Act and to promptly furnish the Holders with true and complete copies of all such filings (provided that the Company shall not be required to furnish the Holders with copies of any such filings that are filed via EDGAR and publicly available on the Commission’s website). The Company further covenants that it shall take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell shares of the Common Stock held by such Holder without Registration under the Securities Act within the limitation of the exemptions provided by Rule 144 promulgated under the Securities Act, including providing any legal opinions. Upon the request of any Holder, the Company shall deliver to such Holder a written certification of a duly authorized officer as to whether it has complied with such requirements.

 

4. INDEMNIFICATION AND CONTRIBUTION.

 

4.1 Indemnification by the Company. The Company agrees to indemnify and hold harmless each Holder of Registrable Securities, and each of their respective officers, employees, affiliates, directors, partners, members, attorneys and agents, and each person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) each Holder of Registrable Securities (each, a “Holder Indemnified Party”), from and against any expenses, losses, judgments, claims, damages or liabilities, whether joint or several, arising out of or based upon any untrue statement (or allegedly untrue statement) of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was Registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to such Registration Statement, or arising out of or based upon any omission (or alleged omission) to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or any violation by the Company of the Securities Act or any rule or regulation promulgated thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any such Registration; and the Company shall promptly reimburse the Holder Indemnified Party for any legal and any other expenses reasonably incurred by such Holder Indemnified Party in connection with investigating and defending any such expense, loss, judgment, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such expense, loss, claim, damage or liability arises out of or is based upon any untrue statement or allegedly untrue statement or omission or alleged omission made in such Registration Statement, preliminary prospectus, final prospectus, or summary prospectus, or any such amendment or supplement, in reliance upon and in conformity with information furnished to the Company, in writing, by such Selling Holder expressly for use therein. The Company also shall indemnify any Underwriter of the Registrable Securities, their officers, affiliates, directors, partners, members and agents and each person who controls such Underwriter on substantially the same basis as that of the indemnification provided above in this Section 4.1.

 

 

4.2 Indemnification by Holders of Registrable Securities. Each Selling Holder of Registrable Securities will, in the event that any Registration is being effected under the Securities Act pursuant to this Agreement of any Registrable Securities held by such Selling Holder, indemnify and hold harmless the Company, each of its directors and officers and each underwriter (if any), and each other Selling Holder and each other Person, if any, who controls another Selling Holder or such underwriter within the meaning of the Securities Act, against any losses, claims, judgments, damages or liabilities, whether joint or several, insofar as such losses, claims, judgments, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or allegedly untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was Registered under the Securities Act, any preliminary prospectus, final prospectus or summary prospectus contained in the Registration Statement, or any amendment or supplement to the Registration Statement, or arise out of or are based upon any omission or the alleged omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading, if the statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company by such Selling Holder expressly for use therein, and shall reimburse the Company, its directors and officers, and each other Selling Holder or controlling person for any legal or other expenses reasonably incurred by any of them in connection with investigation or defending any such loss, claim, damage, liability or action. Each Selling Holder’s indemnification obligations hereunder shall be several and not joint and shall be limited to the amount of any net proceeds actually received by such Selling Holder. Each Selling Holder of Registrable Securities shall indemnify any Underwriter of the Registrable Securities, their officers, affiliates, directors, partners, members and agents and each person who controls such Underwriter to the same extent as provided in the foregoing with respect to indemnification of the Company.

 

4.3 Conduct of Indemnification Proceedings. Promptly after receipt by any person of any notice of any loss, claim, damage or liability or any action in respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such person (the “Indemnified Party”) shall, if a claim in respect thereof is to be made against any other person for indemnification hereunder, notify such other person (the “Indemnifying Party”) in writing of the loss, claim, judgment, damage, liability or action; provided, however, that the failure by the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and solely to the extent the Indemnifying Party is actually prejudiced by such failure. If the Indemnified Party is seeking indemnification with respect to any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be entitled to participate in such claim or action, and, to the extent that it wishes, jointly with all other Indemnifying Parties, to assume control of the defense thereof with counsel satisfactory to the Indemnified Party. After notice from the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that in any action in which both the Indemnified Party and the Indemnifying Party are named as defendants, the Indemnified Party shall have the right to employ separate counsel (but no more than one such separate counsel) to represent the Indemnified Party and its controlling Persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party against the Indemnifying Party, with the fees and expenses of such counsel to be paid by such Indemnifying Party if, based upon the written opinion of counsel of such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. No Indemnifying Party shall, without the prior written consent of the Indemnified Party, consent to entry of judgment or effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such judgment or settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding.

 

 

4.4 Contribution.

 

4.4.1 If the indemnification provided for in the foregoing Sections 4.1, 4.2 and 4.3 is unavailable to any Indemnified Party in respect of any loss, claim, damage, liability or action referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the Indemnified Parties and the Indemnifying Parties in connection with the actions or omissions which resulted in such loss, claim, damage, liability or action, as well as any other relevant equitable considerations. The relative fault of any Indemnified Party and any Indemnifying Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such Indemnified Party or such Indemnifying Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

4.4.2 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 4.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding Section 4.4.1. The amount paid or payable by an Indemnified Party as a result of any loss, claim, damage, liability or action referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 4.4, no Holder of Registrable Securities shall be required to contribute any amount in excess of the dollar amount of the net proceeds (after payment of any underwriting fees, discounts, commissions or taxes) actually received by such Holder from the sale of Registrable Securities which gave rise to such contribution obligation. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

4.5 Survival. The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Party or any officer, director or controlling person of such Indemnified Party and shall survive the transfer of securities.

 

4.6 Non-Exclusivity. The obligations of the parties under this Section 4 will be in addition to any liability which any party may otherwise have to any other party.

 

 

5. RULE 144. The Company covenants that it shall file any reports required to be filed by it under the Securities Act and the Exchange Act and shall take such further action as the Holders of Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holders to sell Registrable Securities without Registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission.

 

6. LOCK-UP.

 

6.1 Lock-Up. Subject to Section 6.2 and Section 6.3, each Holder agrees that, during the period commencing on the date hereof and ending on the date that is six (6) months from the date hereof, the Holder shall not (i) sell, offer to sell, contract or agree to sell, hypothecate, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of any Registrable Securities owned by the Holder whether any such transaction is to be settled by delivery of such securities, in cash or otherwise, or (iii) publicly announce any intention to effect any transaction specified in clause (i) or (ii).

 

6.2 Exceptions. The provisions of Section 6.1 shall not apply to:

 

6.2.1

transactions relating to shares of Common Stock acquired in open market transactions or otherwise acquired after the date hereof;

 

6.2.2

transfers of shares of Common Stock or any security convertible into or exercisable or exchangeable for Common Stock as a bona fide gift;

 

6.2.3

transfers of shares of Common Stock to a trust, or other entity formed for estate planning purposes, for the primary benefit of the spouse, domestic partner, parent, sibling, child or grandchild of the undersigned or any other person with whom the undersigned has a relationship by blood, marriage or adoption not more remote than first cousin;

 

 

6.2.4

transfers by will or intestate succession upon the death of the undersigned;

 

6.2.5

the transfer of shares of Common Stock pursuant to a qualified domestic order or in connection with a divorce settlement;

 

6.2.6

(i) transfers to another corporation, partnership, limited liability company, trust or other business entity that controls, is controlled by or is under common control with the undersigned or (ii) distributions of shares of Common Stock to partners, limited liability company members or stockholders of the undersigned;

 

6.2.7

transfers to the Company or the Company’s officers, directors or their affiliates; and

 

6.2.8

transfers to any third-party pledgee pursuant to any pledge, hypothecation or other granting of a security interest in the Registrable Securities to one or more lending institutions in a bona fide transaction as collateral or security to secure obligations pursuant to lending or other arrangements between such third parties and the Holder or any similar arrangement relating to a financing arrangement for the benefit of the Holder;

 

6.2.9

sales of Redeemable Units in the event that a Redemption Closing (as defined below) pursuant to Section 6.3 does not occur or redemption pursuant to Section 6.3 is not available;

 

provided, that in the case of any transfer or distribution pursuant to Sections 6.2.2 through 6.2.9, each donee, distributee or other transferee shall agree in writing, in form and substance reasonably satisfactory to the Company, to be bound by the provisions of this Agreement.

 

6.3 PIPE Equity Offering. If the Company consummates the sale of $50,000,000 or more in Units (excluding, for the avoidance of doubt, the Consideration Units but including the Units sold in the “Initial Closing” pursuant to the NCP Subscription Agreement and shares sold in the “Final Closing” pursuant to the NCP Subscription Agreement) in the PIPE Equity Offering by May [20], 2021 (the “Termination Date”), then the Holders shall have the right to elect to have a total of up to the lesser of (a) 5,000 of the Consideration Units and (b) that number of Consideration Units equal to (i) the aggregate dollar amount of Units sold in the PIPE Equity Offering by the Termination Date minus $50,000,000, divided by (ii) $1,000 (as applicable, the “Redeemable Units”) redeemed by the Company, for a purchase price of $1,000 per Unit (the “Redemption Price”). Any such redemption (a “Redemption Closing”) under this Section 6.3 shall occur within ten (10) days after the Company receives a notice from the Holders electing to have all or a portion of the Redeemable Units redeemed (“Redemption Notice”), which Redemption Notice shall be given within ten (10) days following the Termination Date (and, if not given by such date, the Holders’ rights under this Section 6.3 shall be waived and of no further force or effect). At a Redemption Closing, (a) the Holders shall surrender to the Company the Debentures and Warrants representing the Redeemable Units, (b) the Company shall pay to the Holders, by wire transfer of immediately available funds, to the bank accounts previously designated by the Holders to the Company, an amount equal to the product of (i) the Redemption Price multiplied by (ii) the number of Redeemable Units, and (c) the Company shall reissue to the Holders, as applicable, the remaining Debentures and Warrants, if any. As provided above, the redemption rights in this Section 6.3 shall be applicable to a block of up to 5,000 of the Consideration Units issued to Holders on the Closing Date.

 

 

6.4 Regulatory Filings(a). Following the date hereof, the parties hereto shall cooperate with each other and use their respective commercially reasonable efforts, subject to and without limiting anything contained in this Agreement or the Purchase Agreement, to obtain all material approvals or consents from, or to provide or make any material notice or registration filing with (each a “Regulatory Filing”), any Governmental Authority, including any Regulatory Filing required by a Governmental Authority to be made in connection with the conversion of the Debentures issuable to the Holders under the Purchase Agreement and the exercise of the Warrants issuable to the Holders under the Purchase Agreement. No Holder nor any of their respective Affiliates shall have any obligation to pay any costs or expenses in connection with making a Regulatory Filing, unless all of such costs and expenses (if any) will be borne exclusively by the Company.

 

7. BOARD OF DIRECTORS.

 

7.1 Board Composition. As of the date hereof, one of the members of the Board shall be a representative nominated or appointed by Holder (the “Ribbon Director”). So long as the Minimum Holding Condition is satisfied, the Company agrees to take all actions reasonably necessary (including, without limitation, increasing the size of the Board if necessary) to cause such Ribbon Director to be included in the slate of nominees recommended by the Board to the Company’s stockholders for election as a director in respect of the applicable class of directors at each meeting of the stockholders of the Company when such class of directors is up for election (and/or in connection with any election by written consent with respect thereto), and the Company shall use the same efforts to cause the election of such nominee as it uses to cause other nominees recommended by the Board to be elected, including soliciting proxies in favor of the election of such Ribbon Director. Each Significant Holder agrees with the Company, and solely with the Company, to vote all voting securities of the Company over which such Significant Holder has voting control, and to take all other actions reasonably necessary or desirable within such Significant Holder’s control (whether in such Significant Holder’s capacity as a stockholder, director, member of a board committee or officer of the Company or otherwise, and including attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), (a) so that the members of the Board shall include the Ribbon Director (but only if the Ribbon Director is included in the slate of nominees recommended by the Board), and (b) to cause an appropriate successor or replacement Ribbon Director nominee to be elected or appointed to fill a vacancy pursuant to Section 7.2 if requested by the Company.

 

7.2 Vacancies. If a vacancy occurs because of the death, disability, disqualification, resignation or removal of a Ribbon Director or for any other reason, or in the event of the failure of such nominee to be elected, and at such time, the Minimum Holding Condition is satisfied, then the Holder shall be entitled to designate such person’s successor or replacement, and the Company shall, within ten (10) days of such designation, take all necessary actions within its control such that such vacancy shall be filled with such successor Ribbon Director nominee, and, to the extent permitted under the Company organizational documents then in effect, to cause the Board to promptly elect such designee to the Board, it being understood that any such successor designee shall serve the remainder of the term of the director whom such designee replaces.

 

 

7.3 Observer Rights. If the Minimum Holding Condition is satisfied and the Holder does not fill a vacancy on the Board pursuant to Section 7.2, Holder shall have the right to designate from time to time and at any time one (1) representative (the “Observer”) to attend all meetings of the Board (and all committees thereof) of the Company as a non-voting observer (it being understood that the failure to appoint an Observer shall not be deemed or claimed to be waiver of any such right). The Company shall (i) give the Observer notice, at the same time as furnished to the directors, of all meetings of the Board, (ii) provide to the Observer all notices, documents and information furnished to the members of the Board whether at or in anticipation of a meeting, an action by written consents or otherwise, at the same time as furnished to the directors, (iii) notify the Observer by telephone or email of, and permit the Observer to attend in person, or by telephone or other electronic means, any and all meetings (including virtual and emergency meetings) of the Board, and (iv) provide the Observer copies of the minutes of all such meetings at the time such minutes are furnished to the directors; provided, however, that the Company shall not be obligated hereunder to provide information (i) that the Company reasonably determines in good faith to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement, in a form reasonably acceptable to the Company) or (ii) the disclosure of which would adversely affect the attorney-client privilege between the Company and its counsel.

 

7.4 Director Indemnification. The Company shall obtain customary director and officer indemnity insurance on reasonable terms for so long as the Ribbon Director serves on the Board, and upon removal or resignation of any Ribbon Director for any reason, the Company shall use commercially reasonable efforts to extend such director and officer indemnity insurance coverage for a period of not less than six years from the date of any such event in respect of any acts or omissions occurring at or prior to the date of such event. For so long as the Ribbon Director serves on the Board, the Company shall indemnify the Ribbon Director to the maximum extent permitted under applicable laws and shall use commercially reasonable efforts to not allow any amendment, alteration or repeal of any right to indemnification or exculpation covering or benefiting any Ribbon Director to the extent consistent with applicable law (except to the extent such amendment, alteration or repeal permits the Company to provide broader or more favorable indemnification or exculpation rights). The Company hereby acknowledges that any director, officer or other indemnified person covered by any such indemnity insurance policy (any such Person, an “Indemnitee”) may have certain rights to indemnification, advancement of expenses and/or insurance provided by Ribbon or one or more of its Affiliates (collectively, the “Ribbon Indemnitors”). The Company hereby: (a) agrees that the Company and any of its Subsidiaries that provides indemnification shall be the indemnitor of first resort (i.e., its or their obligations to an Indemnitee shall be primary and any obligation of any Fund Indemnitor to advance expenses or to provide indemnification for the same expenses or liabilities incurred by an Indemnitee shall be secondary); (b) agrees that it shall be required to advance the full amount of expenses incurred by an Indemnitee and shall be liable for the full amount of all expenses, judgments, penalties, fines and amounts paid in settlement to the extent legally permitted and as required by the terms of this Agreement or any other agreement between the Company and an Indemnitee, without regard to any rights an Indemnitee may have against any Ribbon Indemnitor or its insurers; and (c) irrevocably waives, relinquishes and releases the Ribbon Indemnitors from any and all claims against the Ribbon Indemnitors for contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement or payment by the Ribbon Indemnitors on behalf of an Indemnitee with respect to any claim for which such Indemnitee has sought indemnification from the Company shall affect the foregoing and the Ribbon Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of such Indemnitee against the Company. The Ribbon Director and Ribbon Indemnitors are intended third-party beneficiaries of this Section 7.3 and shall have the right, power and authority to enforce the provisions of this Section 7.3 as though they were a party to this Agreement.

 

 

7.5 Failure to Meet Minimum Holding Condition. If at any time, the Minimum Holding Condition (as defined below) ceases to be satisfied, and upon the written request of the Company, then the Ribbon Director shall tender his or her resignation to the Board of Directors for the Board of Director’s consideration within ten (10) Business Days of receiving such written request from the Company. The Holder’s board designation right pursuant to this Section 7 shall terminate and be of no further force and effect upon such time the Holder ceases to satisfy the Minimum Holding Condition and shall not be reinstated under any circumstances. For purposes of this Agreement, the “Minimum Holding Condition” shall be deemed to be satisfied until such time the Holder ceases to own an amount of shares of Common Stock equal to at least 25% of the total number of Conversion Shares issuable upon conversion of the Debentures included within the Consideration Units on the date hereof (or Debentures convertible in the aggregate into such amount) (as the same may be adjusted by share splits, reverse splits, share dividends, recapitalizations or other similar events).

 

8. MISCELLANEOUS.

 

8.1 Other Registration Rights. The Company represents and warrants that, except as set forth in the Registration Rights Agreement dated April 7, 2020 by and among the Company and the holders party thereto, as amended on or about the date hereof, no Person, other than a Holder of the Registrable Securities, has any right to require the Company to Register any shares of the Company’s capital stock for sale or to include shares of the Company’s capital stock in any Registration filed by the Company for the sale of shares of capital stock for its own account or for the account of any other Person. Further, the Company shall not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the Holders of Registrable Securities and the Company represents and warrants that this Agreement supersedes any other registration rights agreement or agreement with similar terms and conditions and in the event of a conflict between any such agreement or agreements and this Agreement, the terms of this Agreement shall prevail. Further, the Company represents that no person, other than a Holder of the Redeemable Units, has any right to participate in a Redemption Closing and no Person shall hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the Holders of Redeemable Units under this Agreement with respect to any Redemption Closing.

 

 

8.2 Assignment; No Third Party Beneficiaries. This Agreement and the rights, duties and obligations of the Company hereunder may not be assigned or delegated by the Company in whole or in part. This Agreement and the rights, duties and obligations of the Holders of Registrable Securities hereunder may be freely assigned or delegated by such Holder of Registrable Securities in conjunction with and to the extent of any transfer of Registrable Securities by any such Holder. This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties and the permitted assigns of the applicable Holder of Registrable Securities or of any assignee of the applicable Holder of Registrable Securities. This Agreement is not intended to confer any rights or benefits on any persons that are not party hereto other than as expressly set forth in Article 4, Section 7.3 and this Section 8.2. No assignment by any party hereto of such party’s rights, duties and obligations hereunder shall be binding upon or obligate the Company unless and until the Company shall have received (i) written notice of such assignment and (ii) the written agreement of the assignee, in a form reasonably satisfactory to the Company, to be bound by the terms and provisions of this Agreement (which may be accomplished by an addendum or certificate of joinder to this Agreement).

 

8.3 Notices. All notices, demands, requests, consents, approvals or other communications (collectively, “Notices”) required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be personally served, delivered by reputable air courier service with charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile, addressed as set forth below, or to such other address as such party shall have specified most recently by written notice. Notice shall be deemed given on the date of service or transmission if personally served or transmitted by telegram, telex or facsimile; provided, that if such service or transmission is not on a Business Day or is after normal business hours, then such notice shall be deemed given on the next Business Day. Notice otherwise sent as provided herein shall be deemed given on the next Business Day following timely delivery of such notice to a reputable air courier service with an order for next-day delivery.

 

If to the Company:

 

American Virtual Cloud Technologies, Inc.
1720 Peachtree Street, Suite 629
Atlanta, Georgia 30309
Attention: Thomas King
E-Mail: [email protected]

 

with a copy to (which shall not constitute notice):

 

Greenberg Traurig, LLP
Terminus 200, Suite 2500
3333 Piedmont Road, NE
Atlanta, Georgia 30305
Attention: David R. Yates and Theodore I Blum
E-Mail: [email protected] and [email protected]

 

If to the Holder:

 

Ribbon Communications Inc.
4 Technology Park Drive
Westford, Massachusetts 01886
Attention: Patrick Macken, EVP and Chief Legal Officer
E-Mail: [email protected]

 

 

with a copy to (which shall not constitute notice):

 

Latham & Watkins LLP
885 Third Avenue
New York, NY 10022-4834
Attention: David Allinson; Jane Greyf
E-Mail: [email protected]; [email protected]

 

8.4 Severability. This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible that is valid and enforceable.

 

8.5 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, and all of which taken together shall constitute one and the same instrument.

 

8.6 Entire Agreement. This Agreement (including, without limitation, all agreements entered into pursuant hereto and all certificates and instruments delivered pursuant hereto and thereto) constitute the entire agreement of the parties with respect to the subject matter hereof and supersede all prior and contemporaneous agreements, representations, understandings, negotiations and discussions between the parties, whether oral or written.

 

8.7 Modifications and Amendments. Upon the written consent of the Company and the Holders of at least sixty-six and two-thirds percent (66-2/3%) of the Registrable Securities at the time in question, compliance with any of the provisions, covenants and conditions set forth in this Agreement may be waived, or any of such provisions, covenants or conditions may be amended or modified; provided, however, that notwithstanding the foregoing, any amendment hereto or waiver hereof that adversely affects one Holder of Registrable Securities, solely in its capacity as a Holder of the shares of Common Stock of the Company, in a manner that is materially different from the other Holders of Registrable Securities (in such capacity) shall require the consent of the Holder so affected. No course of dealing between any Holders of Registrable Securities or the Company and any other party hereto or any failure or delay on the part of a Holder of Registrable Securities or the Company in exercising any rights or remedies under this Agreement shall operate as a waiver of any rights or remedies of any Holder of Registrable Securities or the Company. No single or partial exercise of any rights or remedies under this Agreement by a party shall operate as a waiver or preclude the exercise of any other rights or remedies hereunder or thereunder by such party.

 

8.8 Titles and Headings. Titles and headings of sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement.

 

 

8.9 Waivers and Extensions. Any party to this Agreement may waive any right, breach or default which such party has the right to waive, provided that such waiver will not be effective against the waiving party unless it is in writing, is signed by such party, and specifically refers to this Agreement. Waivers may be made in advance or after the right waived has arisen or the breach or default waived has occurred. Any waiver may be conditional. No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof nor of any other agreement or provision herein contained. No waiver or extension of time for performance of any obligations or acts shall be deemed a waiver or extension of the time for performance of any other obligations or acts.

 

8.10 Remedies Cumulative. In the event that the Company fails to observe or perform any covenant or agreement to be observed or performed under this Agreement, the applicable Holder of Registrable Securities may proceed to protect and enforce its rights by suit in equity or action at law, whether for specific performance of any term contained in this Agreement or for an injunction against the breach of any such term or in aid of the exercise of any power granted in this Agreement or to enforce any other legal or equitable right, or to take any one or more of such actions, without being required to post a bond. None of the rights, powers or remedies conferred under this Agreement shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy, whether conferred by this Agreement or now or hereafter available at law, in equity, by statute or otherwise. Notwithstanding anything to the contrary contained in this Agreement, only the Company may proceed against a Significant Holder to enforce its rights by any legal or equitable remedies which it may have (including bringing an action for specific performance) in the event such Significant Holder fails to observe or perform any covenant or agreement to be observed or performed by such Significant Holder under Section 7.1, and no Significant Holder shall have any right to enforce any remedies contained in this Agreement.

 

8.11 Governing Law. This Agreement shall be governed by, interpreted under, and construed in accordance with the internal laws of the State of Delaware applicable to agreements made and to be performed within the State of Delaware, without giving effect to any choice-of-law provisions thereof that would compel the application of the substantive laws of any other jurisdiction.

 

8.12 Waiver of Trial by Jury. Each party hereby irrevocably and unconditionally waives the right to a trial by jury in any action, suit, counterclaim or other proceeding (whether based on contract, tort or otherwise) arising out of, connected with or relating to this Agreement, the transactions contemplated hereby, or the actions of the Holders in the negotiation, administration, performance or enforcement hereof.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

 

IN WITNESS WHEREOF, the parties have caused this Investor Rights Agreement to be executed and delivered by their duly authorized representatives as of the date first written above.

 

	COMPANY:
	AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC.,
	a Delaware corporation
	By:	/s/ Thomas H. King
		Name: Thomas H. King
		Title:   Chief Financial Officer

 

[Signature Page to Investor Rights Agreement]

 

 

	HOLDER:
	RIBBON COMMUNICATIONS, INC.,
	a Delaware corporation
	By:	/s/ Bruce McClelland
	Name:	Bruce McClelland
	Title:	President & Chief Executive Officer

 

 

	SIGNIFICANT HOLDERS:
	STRATOS MANAGEMENT SYSTEMS HOLDINGS, LLC
	By:	/s/ Lawrence E. Mock
	Name:	Lawrence E. Mock
	Title:	Managing Member
	PENSARE SPONSOR GROUP, LLC
	By:	/s/ Darrell J. Mays
	Name:	Darrell J. Mays
	Title:	Manager

 

 

29

 

Exhibit 10.5

 

EXECUTION VERSION

 

SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made as of December 1, 2020 by and among American Virtual Cloud Technologies, Inc., a Delaware corporation (the “Company”), SPAC Opportunity Partners Investment Sub LLC, a Delaware limited liability company (the “Initial Investor”), solely for purposes of Section 6.5 and Section 9.6, Ribbon Communications Inc., a Delaware corporation (“Ribbon”), and any other parties that may sign a counterpart signature page or joinder to this Agreement from time to time after the date hereof to become a party to this Agreement as an additional investor (the “Additional Investors”) (the Initial Investor and each Additional Investor, an “Investor” and collectively, the “Investors”).

 

RECITALS

 

A. The Company and the Investors are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the provisions of Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”), and/or Regulation D (“Regulation D”), as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act;

 

B. In connection with the transactions (collectively, the “Transaction”) contemplated by that certain Purchase Agreement, dated as of August 5, 2020, as amended and restated on December 1, 2020 (the “Transaction Agreement”), by and among the Company, Ribbon, Ribbon Communications Operating Company, Inc. (“RCOCI”) and Ribbon Communications International Limited, the Investors wish to purchase from the Company, and the Company wishes to sell and issue to the Investors, upon the terms and conditions stated in this Agreement, an aggregate of up to 60,000 units of securities (the “Units”), each Unit consisting of (i) $1,000 in principal amount of the Company’s Series A-1 convertible debentures in the form attached hereto as Exhibit A (the “Debentures”) and (ii) a warrant to purchase 100 shares of the Company’s common stock, par value $.0001 per share (the “Common Stock”), at an exercise price of $0.01 per whole share in the form attached hereto as Exhibit B (the “Warrants”);

 

C. The purchase price per Unit is $1,000 (the “Purchase Price”); and

 

D. Contemporaneously with the Initial Closing (as defined herein), the parties hereto will execute and deliver an amendment in the form attached hereto as Exhibit C (the “RRA Amendment”) to that certain Registration Rights Agreement, dated as of April 7, 2020 (the “Registration Rights Agreement”), by and among the Company and the holders identified therein, pursuant to which the shares of Common Stock issuable upon conversion of the Debentures and upon exercise of the Warrants will be added as “Registrable Securities” to the Registration Rights Agreement and the Investors will be added as parties thereto.

 

 

NOW, THEREFORE, in consideration of the mutual promises made in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties to this Agreement agree as follows:

 

1. Definitions. In addition to those terms defined above and elsewhere in this Agreement, for the purposes of this Agreement, the following terms shall have the meanings set forth below:

 

“Affiliate” means, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries Controls, is controlled by, or is under common control with, such Person.

 

“Board” means the board of directors of the Company.

 

“Business Day” means a day, other than a Saturday or Sunday, on which banks in Atlanta, Georgia are open for the general transaction of business.

 

“Certificate of Incorporation” means the Second Amended and Restated Certificate of Incorporation of the Company as filed with the Delaware Secretary of State on April 1, 2020, as it may be amended from time to time.

 

“Company’s Knowledge” means the actual knowledge of the executive officers (as defined in Rule 405 under the Securities Act) of the Company.

 

“Control” (including the terms “controlling”, “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.

 

“Conversion Shares” means the shares of Common Stock issuable upon conversion of the Debentures pursuant to the terms thereof.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

 

“Governmental Authority” means any United States federal, state or local government or any foreign government, or political subdivision thereof, or any multinational organization or authority or any authority, agency or commission entitled to exercise any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power, including any court or tribunal (or any department, bureau or division thereof), or any arbitrator or arbitral body

 

“Governmental Order” means any order, writ, judgment, injunction, decree, stipulation, ruling, determination or award entered by or with any Governmental Authority in a judicial or administrative proceeding.

 

“Guaranty” means the Guaranty of certain of the Company’s Subsidiaries required to be delivered to the Investors in accordance with the terms of the Debentures.

 

 

“Intellectual Property” will mean algorithms, databases, data collections, diagrams, inventions (whether or not patentable), know-how, logos, marks (including brand names, product names, logos, and slogans), methods, network configurations and architectures, processes, proprietary information, protocols, schematics, specifications, software, techniques, URLs, web sites, works of authorship and other forms of technology (whether or not embodied in any tangible form and including all tangible embodiments of the foregoing, such as instruction manuals, prototypes, samples, studies and summaries).

 

“Intellectual Property Rights” will mean all past, present, and future rights of the following types, which may exist or be created under the laws of any jurisdiction in the world: (i) rights associated with works of authorship, including exclusive exploitation rights, copyrights and moral rights; (ii) trademark and trade name rights and similar rights; (iii) trade secret rights; (iv) patent and industrial property rights; (v) other proprietary rights in Intellectual Property; and (vi) rights in or relating to registrations, renewals, extensions, combinations, divisions and reissues of, and applications for, any of the rights referred to in clauses “(i)” through “(v)” above.

 

“Law” means any United States federal, state, local or similar statute, law, standard, resolution, promulgation, ordinance, regulation, rule, code, order, requirement or rule of law (including common law), or any similar provision having the force or effect of law.

 

“Legal Requirement” means any Law, Governmental Order or License.

 

“Material Adverse Effect” means with respect to the Company, an event, violation, inaccuracy, circumstance, condition or other matter, individually or in the aggregate, that has had or could reasonably be expected to have a material adverse effect on the consolidated business, financial condition, assets, liabilities, prospects or results of operations of the Company and its Subsidiaries, taken as a whole (determined after giving effect to the consummation of the Transaction), or (ii) the ability of the Company to perform its obligations under the Transaction Documents.

 

“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, governmental authority or any other form of entity not specifically listed herein.

 

“Registration Statement” has the meaning set forth in the Registration Rights Agreement.

 

“Required Consent” means the written consent of the holders of a majority of the aggregate principal amount of the Debentures outstanding at the time of such consent.

 

“SEC Reports” means the forms, reports, schedules, statements and other documents, including any exhibits thereto, filed by the Company with the SEC since July 5, 2017, together with any amendments, restatements or supplements thereto.

 

 

“Securities” means the Debentures, the Conversion Shares the Warrants and the Warrant Shares.

 

“Subsidiary” of any Person means another Person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person.

 

“Transaction Closing” means the closing of the transactions contemplated by the Transaction Agreement.

 

“Transaction Documents” means this Agreement, the Debentures, the Guaranties, the Warrants and the RRA Amendment.

 

“Warrant Shares” means the shares of Common Stock issuable upon the exercise of the Warrants.

 

2. Purchase and Sale of the Units. Subject to the terms and conditions of this Agreement, on the Initial Closing Date (as defined below), the Initial Investor shall purchase, and the Company shall sell and issue to the Initial Investor, 10,000 Units for an aggregate Purchase Price of Ten Million Dollars ($10,000,000) (the “Initial Units”). Thereafter, the Company may issue and sell additional Units to the Initial Investor and/or one or more Additional Investors in accordance with the provisions of Section 3.2 below.

 

3. Closings.

 

3.1 Initial Closing. The initial closing of the sale of the Units contemplated hereby to the Initial Investor (the “Initial Closing”) is contingent upon the substantially concurrent consummation of the Transaction. The Initial Closing shall occur on the date of, and immediately prior to, the consummation of the Transaction. Following written notice from (or on behalf of) the Company to the Initial Investor (the “Closing Notice”) that the Company reasonably expects all conditions to the closing of the Transaction to be satisfied or waived, the Initial Investor shall deliver to the Company, not later than 12:00 noon Eastern Time on the Business Day immediately preceding the closing date specified in the Closing Notice (the “Initial Closing Date”), the Purchase Price for the Initial Investor’s Units to be purchased at the Initial Closing by wire transfer of United States dollars in immediately available funds to the account specified by the Company in the Closing Notice against delivery to the undersigned at the Initial Closing of the Debentures and Warrants included in the Initial Investor’s Units. Pending consummation of the Transaction, the Company shall hold such Purchase Price in trust for such Investor subject to return as set forth in Section 6.5 of this Agreement.

 

 

3.2 Additional Closings. The Company may issue and sell additional Units to the Initial Investor and/or one or more Additional Investors on the terms and conditions of this Agreement; provided that the aggregate number of Units issued pursuant to this Agreement shall not exceed 60,000 Units. Each Additional Investor shall execute this Agreement in the capacity of an Investor and Exhibit A shall be supplemented to reflect the sale of such additional Units. The closing(s) of the purchase and sale of any additional Units to be acquired by the Additional Investors from the Company under this Agreement (the “Additional Closing(s)”) shall take place on such dates as agreed to by the Company and such Additional Investors but in no event later than May 24, 2021 (the “Final Closing Date”). Notwithstanding anything to the contrary contained herein, subject to the conditions set forth in Section 6.2, if, as of the Final Closing Date the aggregate number of Units sold hereunder (including the Units sold at the Initial Closing and any Units to be sold to Additional Investors on the Final Closing Date) is less than 35,000 on the Final Closing Date, an Additional Closing shall occur at which the Company shall issue and sell to the Initial Investor or its assignee(s), and the Initial Investor or its assignee(s) shall purchase from the Company, that number of Units equal to (a) 35,000 minus (b) the aggregate number of Units sold hereunder prior to the Final Closing Date (including the Units sold at the Initial Closing and any Units to be sold to Additional Investors on the Final Closing Date) (such number of Units, the “Remaining Units”). At each Additional Closing each applicable Investor shall deliver to the Company the Purchase Price for such Investor’s Units by wire transfer of United States dollars in immediately available funds to the account specified by the Company against delivery to the undersigned at the Additional Closing of the Debentures and Warrants included in such Additional Investor’s Units.

 

4. Representations and Warranties of the Company. The Company hereby represents and warrants to the Investors that, except as set forth in the schedules delivered herewith (collectively, the “Disclosure Schedules”) and except as set forth in the SEC Reports (to the extent the qualifying nature of such disclosure is readily apparent from the content of such SEC Reports, but excluding disclosures referred to in “Forward-Looking Statements”, “Risk Factors” and any other disclosures therein to the extent they are of a predictive or cautionary nature or related to forward-looking statements):

 

4.1 Organization, Good Standing and Qualification. Each of the Company and its Subsidiaries is a corporation or other business entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite corporate power and authority to carry on its business as now conducted and to own its properties. Each of the Company and its Subsidiaries is duly qualified to do business as a foreign corporation or other business entity and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property makes such qualification or leasing necessary unless the failure to so qualify has not had and would not reasonably be expected to have a Material Adverse Effect.

 

4.2 Authorization. The Company and each of its Subsidiaries has full power and authority and has taken all requisite action on the part of the Company, its officers, directors and stockholders necessary for (i) the authorization, execution and delivery of the Transaction Documents, (ii) subject to receipt of the Stockholder Approval (as defined herein), the authorization of the performance of all obligations of the Company hereunder or thereunder, and (iii) subject to receipt of the Stockholder Approval, the authorization, issuance (or reservation for issuance) and delivery of the Securities. The Transaction Documents constitute the legal, valid and binding obligations of the Company and the Subsidiaries party thereto, enforceable against the Company and such Subsidiaries in accordance with their terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally and to general equitable principles.

 

 

4.3 Capitalization. The Company’s authorized and issued capital stock as of the date hereof is as set forth in the Current Report on Form 8-K filed by the Company on April 7, 2020, as modified by any SEC Reports filed after such date. All of the issued and outstanding shares of the Company’s capital stock have been duly authorized and validly issued and are fully paid, nonassessable and free of preemptive rights and were issued in compliance with applicable state and federal securities law and any rights of third parties. No Person is entitled to preemptive or similar statutory or contractual rights with respect to any securities of the Company. Except as set forth in the SEC Reports, there are no outstanding warrants, options, convertible securities or other rights, agreements or arrangements of any character under which the Company or any of its Subsidiaries is or may be obligated to issue any equity securities of any kind, other than the Securities. Except as set forth in the SEC Reports and the Transaction Agreement, there are no voting agreements, buy sell agreements, or option or right of first purchase agreements among the Company and any of the security holders of the Company relating to the securities of the Company held by them. The issuance and sale of the Securities hereunder will not obligate the Company to issue shares of Common Stock or other securities to any other Person (other than the Investors) and will not result in the adjustment of the exercise, conversion, exchange or reset price of any outstanding security. The Company does not have outstanding stockholder purchase rights or “poison pill” or any similar arrangement in effect giving any Person the right to purchase any equity interest in the Company upon the occurrence of certain events.

 

4.4 Valid Issuance. The Debentures, the Warrants and the Guaranties have been duly and validly authorized and issued. Upon the conversion of the Debentures in accordance with the terms thereof and the due exercise of the Warrants in accordance with the terms thereof, the Conversion Shares and Warrant Shares, respectively, will be validly issued, fully paid and nonassessable and free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the Investors. The Company has reserved a sufficient number of shares of Common Stock for issuance of the Conversion Shares upon conversion of the Debentures and for issuance of the Warrant Shares upon the exercise of the Warrants, free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the Investors.

 

4.5 Consents. The execution, delivery and, subject to receipt of the Stockholder Approval (other than with respect to this Agreement), performance by the Company and its Subsidiaries of the Transaction Documents and the offer, issuance and sale of the Securities require no consent of, action by or in respect of, or filing with, any Person, governmental body, agency, or official other than filings that have been made pursuant to applicable state securities laws and post-sale filings pursuant to applicable state and federal securities laws which the Company undertakes to file within the applicable time periods. Subject to the accuracy of the representations and warranties of each Investor set forth in Section 5 hereof, the Company has taken all action necessary to exempt (i) the issuance and sale of the Securities, (ii) the issuance of the Conversion Shares upon conversion of the Debentures, (iii) the issuance of the Warrant Shares upon due exercise of the Warrants, and (iv) the other transactions contemplated by the Transaction Documents from the provisions of any stockholder rights plan or other “poison pill” arrangement, any antitakeover, business combination or control share law or statute binding on the Company or to which the Company or any of its assets and properties may be subject and any provision of the Company’s Certificate of Incorporation or Bylaws that is or could reasonably be expected to become applicable to the Investors as a result of the transactions contemplated hereby, including without limitation, the issuance of the Securities and the ownership, disposition or voting of the Securities by the Investors or the exercise of any right granted to the Investors pursuant to this Agreement or the other Transaction Documents.

 

 

4.6 SEC Reports. The SEC Reports constitute all of the forms, reports, schedules, statements and other documents required to be filed by the Company with the SEC since July 5, 2017. The SEC Reports (i) were prepared in all material respects in accordance with either the requirements of the Securities Act and the Exchange Act, as the case may be, and the rules and regulations promulgated thereunder, and (ii) did not, at the time they were filed, or, if amended, as of the date of such amendment, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. As used in this Section 4.6, the term “file” shall be broadly construed to include any manner in which a document or information is furnished, supplied or otherwise made available to the SEC.

 

4.7 Absence of Certain Changes. Since March 31, 2020, except as expressly contemplated by this Agreement, or specifically disclosed in any SEC Report filed since March 31, 2020 and prior to the date of this Agreement, the Company has conducted its business in the ordinary course and in a manner consistent with past practice, and there has not been any Material Adverse Effect with respect to the Company.

 

4.8 Reserved.

 

4.9 No Conflict, Breach, Violation or Default. The execution, delivery and performance of the Transaction Documents by the Company and its Subsidiaries party thereto and the issuance and sale of the Securities will not conflict with or result in a breach or violation of any of the terms and provisions of, or constitute a default under (i) the Company’s Certificate of Incorporation or the Company’s Bylaws, each as to be in effect on the Closing Date, (ii) the equivalent instruments of any Subsidiary or (iii) (a) subject, in the case of conversion of the Debentures or exercise of the Warrants, to receipt of the Stockholder Approval, any Legal Requirement applicable to the Company, any Subsidiary or any of their respective assets or properties, or (b) any material agreement or material instrument to which the Company or any Subsidiary is a party or by which the Company or a Subsidiary is bound or to which any of their respective assets or properties is subject.

 

 

4.10 Tax Matters. The Company and each Subsidiary have timely filed all tax returns required to have been filed by the Company or such Subsidiary with all appropriate governmental agencies and timely paid all taxes shown thereon or otherwise owed by it. The charges, accruals and reserves on the books of the Company in respect of taxes for all fiscal periods are adequate in all material respects, and there are no material unpaid assessments against the Company or any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of any additional taxes, penalties or interest for any fiscal period or audits by any federal, state or local taxing authority except for any assessment which is not material to the Company and its Subsidiaries, taken as a whole. All material taxes and other material assessments and levies that the Company or any Subsidiary is required to withhold or to collect for payment have been duly withheld and collected and paid to the proper governmental entity or third party when due.

 

4.11 Title to Properties. The Company and each Subsidiary have good and marketable title to all real properties and all other properties and assets owned by it, in each case free from liens, encumbrances and defects that would materially interfere with the use made or currently planned to be made thereof by them; and the Company and each Subsidiary hold any leased real or personal property under valid and enforceable leases with no exceptions that would materially interfere with the use made or currently planned to be made thereof by them.

 

4.12 Certificates, Authorities and Permits. The Company and each Subsidiary possess adequate certificates, authorities, licenses, authorizations, qualifications, registrations or permits (collectively, “Licenses”) issued by appropriate governmental agencies or bodies necessary to conduct the business now operated by it, and neither the Company nor any Subsidiary has received any notice of proceedings or violations relating to the revocation or modification or fines or penalties in respect of any such Licenses that, individually or in the aggregate, if determined adversely to the Company or such Subsidiary, would reasonably be expected to have a material effect on results of operations or financial condition of the Company and its Subsidiaries, taken as a whole.

 

4.13 Reserved.

 

4.14 Litigation. There are no pending actions, suits or proceedings against or affecting the Company, its Subsidiaries or any of its or their properties which are required to be disclosed in the SEC Filings and are not so disclosed or are otherwise material to the Company and its Subsidiaries, taken as a whole; and to the Company’s Knowledge, no such actions, suits or proceedings are threatened nor is there any basis therefor. Neither the Company nor any Subsidiary, nor to the Company’s Knowledge any director or officer thereof, is or since March 31, 2020 has been the subject of any action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. There has not been, and to the Company’s Knowledge, there is not pending or contemplated, any investigation by the SEC involving the Company or to the Company’s Knowledge any current or former director or officer of the Company. The SEC has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Securities Act or the Exchange Act. No director or officer of the Company or any of its Subsidiaries has committed or alleged to have committed any act of sexual harassment or other misconduct, or has been alleged to have created a hostile work place or engaged in workplace discrimination.

 

 

4.15 Financial Statements. The financial statements included in each SEC Report present fairly, in all material respects, the consolidated financial position of the Company and/or its Subsidiaries, as applicable, as of the dates shown and its consolidated results of operations and cash flows for the periods shown, and such financial statements have been prepared in conformity with United States generally accepted accounting principles applied on a consistent basis (“GAAP”) (except as may be disclosed therein or in the notes thereto, and, in the case of quarterly financial statements, as permitted by Form 10−Q under the Exchange Act) and comply as to form in all material respects with all applicable accounting requirements and the published rules and regulations of the SEC. Except as set forth in the financial statements of the Company and/or its Subsidiaries included in the SEC Reports filed prior to the date hereof, neither the Company nor any of its Subsidiaries has incurred any liabilities, contingent or otherwise, except those incurred in the ordinary course of business, consistent (as to amount and nature) with past practices since the date of such financial statements, none of which, individually or in the aggregate, have had or could reasonably be expected to have a Material Adverse Effect or resulted from a violation of any Legal Requirement or any License, or any breach of any material contract or agreement, written or otherwise.

 

4.16 Listing. The issued and outstanding shares of Common Stock are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on the Nasdaq Capital Market under the symbol “AVCT”. The Company’s issued and outstanding warrants are registered pursuant to Section 12(b) of the Exchange Act and are listed for trading on the Nasdaq Capital Market under the symbol “AVCTW”. As of the date of this Agreement, there is no action or proceeding pending or, to the Company’s Knowledge, threatened in writing against the Company by the Nasdaq Capital Market or the SEC with respect to any intention by such entity to deregister the Company’s Common Stock or warrants or terminate the listing of the Company on the Nasdaq Capital Market.

 

4.17 Brokers and Finders. No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of the Company, other than any such commission, fee or other compensation payable solely by the Company.

 

4.18 No Directed Selling Efforts or General Solicitation. Neither the Company nor to the Company’s Knowledge any Person acting on its behalf has conducted any general solicitation or general advertising (as those terms are used in Regulation D) in connection with the offer or sale of the Units.

 

 

4.19 No Integrated Offering. Neither the Company nor any of its Affiliates, nor to the Company’s Knowledge any Person acting on its or their behalf has, directly or indirectly, made any offers or sales of any Company security or solicited any offers to buy any security, under circumstances that would adversely affect reliance by the Company on Section 4(a)(2) of the Securities Act for the exemption from registration for the transactions contemplated hereby or would require registration of the Securities under the Securities Act.

 

4.20 Private Placement. Assuming the accuracy of representations and warranties of the Investors contained in this Agreement, the offer and sale of the Securities to the Investors as contemplated hereby is exempt from the registration requirements of the Securities Act.

 

4.21 Questionable Payments. Neither the Company nor any of its Subsidiaries nor, to the Company’s Knowledge, any of their respective current or former directors, officers, employees, agents or other Persons acting on behalf of the Company or any Subsidiary, has on behalf of the Company or any Subsidiary or in connection with their respective businesses: (a) used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity; (b) made any direct or indirect unlawful payments to any governmental officials or employees from corporate funds; (c) established or maintained any unlawful or unrecorded fund of corporate monies or other assets; (d) made any false or fictitious entries on the books and records of the Company or any Subsidiary; or (e) made any unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful payment of any nature.

 

4.22 Transactions with Affiliates. Except as disclosed in the SEC Reports (or would not be required to be disclosed therein), none of the officers or directors of the Company or its Subsidiaries and, to the Company’s Knowledge, none of the employees of the Company or its Subsidiaries is presently a party to any transaction with the Company or any Subsidiary (other than as holders of stock options and/or warrants, for services as employees, officers and directors, and/or for the purchase of Units pursuant to this Agreement, including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the Company’s Knowledge, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

 

4.23 Sarbanes Oxley. The Company is in material compliance with the provisions of the Sarbanes Oxley Act of 2002 currently applicable to the Company. The Company has established (a) disclosure controls and procedures (as defined in Exchange Act Rules 13a−15(e) and 15d−15(e)) and designed such disclosure controls and procedures to ensure that material information relating to the Company, including the Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s most recently filed periodic report under the Exchange Act, as the case may be, is being prepared and (b) internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) (clauses (a) and (b) being collectively referred to as “Controls and Procedures”). The Company’s certifying officers have evaluated the effectiveness of the Company’s Controls and Procedures as of the end of the period covered by the most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”). The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the Controls and Procedures based on their evaluations as of the Evaluation Date. Since the Evaluation Date, there have been no significant changes in the Company’s internal controls over financial reporting, nor or to the Company’s Knowledge, in other factors that could significantly affect the Company’s internal controls. The Company has disclosed in the SEC Reports all material weaknesses or significant deficiencies in its internal control over financial reporting. Following completion of the Transaction, the Controls and Procedures of the Company and its Subsidiaries will be effective to enable the Company timely to file with or to furnish to the SEC all required periodic and current reports required following such date in conformity in all material respects with the applicable rules and regulations of the SEC.

 

 

5. Representations and Warranties of the Investors. Each of the Investors hereby severally, and not jointly, represents and warrants to the Company that:

 

5.1 Organization and Existence. Such Investor, if other than an individual, is a validly existing corporation, limited partnership or limited liability company and has all requisite corporate, partnership or limited liability company power and authority to invest in the Securities pursuant to this Agreement.

 

5.2 Authorization. The execution, delivery and performance by such Investor of the Transaction Documents to which such Investor is or will be a party have been duly authorized and each is, or upon execution and delivery by such Investor will, constitute the valid and legally binding obligation of such Investor, enforceable against such Investor in accordance with their respective terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability, relating to or affecting creditors’ rights generally. No consent, approval, authorization, order, filing, registration or qualification of or with any court, government authority or third person is required to be obtained by such Investor in connection with the execution and delivery of the Transaction Documents to which such Investor is or will be a party or the performance of such Investor’s obligations hereunder or thereunder.

 

5.3 Purchase Entirely for Own Account. The Securities to be received by such Investor hereunder will be acquired for such Investor’s own account and not for the account of others or as nominee or agent, and not with a view to, or for, resale, distribution, syndication, or fractionalization thereof, and such Investor has no present intention of selling, granting any participation in, or otherwise distributing the same in violation of the Securities Act without prejudice, however, to such Investor’s right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws. Nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time. Such Investor is not a broker dealer registered with the SEC under the Exchange Act or an entity engaged in a business that would require it to be so registered.

 

 

5.4 Investment Experience. Each Investor understands that such Investor’s investment in the Securities being purchased by such Investor from the Company involves a high degree of risk. Such Investor understands that no United States federal or state agency or any other government or governmental agency has passed or made any recommendation or endorsement of the Securities being purchased by the Investor from the Company. Such Investor acknowledges that it can bear the economic risk and complete loss of its investment in the Securities and has such knowledge and experience in financial or business matters that it is capable of evaluating the merits and risks of the investment contemplated hereby.

 

5.5 Disclosure of Information. Such Investor has had an opportunity to receive all information related to the Company requested by it and to ask questions of and receive answers from the Company regarding the Company, its business and the terms and conditions of the offering of the Securities. Such Investor acknowledges receipt of copies of the SEC Reports. Neither such inquiries nor any other due diligence investigation conducted by such Investor shall modify, limit or otherwise affect such Investor’s right to rely on the Company’s representations and warranties contained in this Agreement.

 

5.6 Restricted Securities. Such Investor understands that the Securities are characterized as “restricted securities” under the U.S. federal securities laws inasmuch as they are being acquired from the Company in a transaction not involving a public offering and that under such laws and applicable regulations such securities may be resold without registration under the Securities Act only in certain limited circumstances.

 

5.7 No Public Market. Such Investor understands that no public market exists for the Debentures or Warrants, and that the Company has made no assurances that a public market will ever exist for the Debentures or Warrants.

 

5.8 Legends. It is understood that, except as provided below, certificates evidencing the Securities may bear the following or any similar legend:

 

(a) “NEITHER THIS DEBENTURE NOR THE SHARES OF COMMON STOCK INTO WHICH THIS DEBENTURE IS CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED, EXCEPT AS SET FORTH IN SECTION 7.2(D) OF THIS DEBENTURE.”

 

(b) If required by the authorities of any state in connection with the issuance of sale of the Securities, the legend required by such state authority.

 

 

5.9 Accredited Investor. Such Investor is an accredited investor as defined in Rule 501(a) of Regulation D, as amended, under the Securities Act.

 

5.10 No General Solicitation. Such Investor did not learn of the investment in the Securities as a result of any general solicitation or general advertising.

 

5.11 Brokers and Finders. No Person will have, as a result of the transactions contemplated by the Transaction Documents, any valid right, interest or claim against or upon the Company, any Subsidiary or an Investor for any commission, fee or other compensation pursuant to any agreement, arrangement or understanding entered into by or on behalf of such Investor.

 

5.12 Prohibited Transactions. Since the earlier of (a) such time as such Investor was first contacted by the Company or any other Person acting on behalf of the Company regarding the transactions contemplated hereby or (b) thirty (30) days prior to the date hereof, neither such Investor nor any Affiliate of such Investor which (x) had knowledge of the transactions contemplated hereby, (y) has or shares discretion relating to such Investor’s investments or trading or information concerning such Investor’s investments, including in respect of the Securities, or (z) is subject to such Investor’s review or input concerning such Affiliate’s investments or trading (collectively, “Trading Affiliates”) has, directly or indirectly, effected or agreed to effect any short sale, whether or not against the box, established any “put equivalent position” (as defined in Rule 16a−1(h) under the 1934 Act) with respect to the Common Stock, granted any other right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security that includes, relates to or derived any significant part of its value from the Common Stock or otherwise sought to hedge its position in the Securities (each, a “Prohibited Transaction”). Notwithstanding the foregoing, in the case of an Investor that is a multimanager investment vehicle whereby separate portfolio managers manage separate portions of such Investor’s assets and the portfolio managers have no direct knowledge of the investment decisions made by the portfolio managers managing other portions of such Investor’s assets, the representation set forth above shall only apply with respect to the portion of assets managed by the portfolio manager that made the investment decision to purchase the Securities covered by this Agreement. Other than to other Persons party to this Agreement, such Investor has maintained the confidentiality of all disclosures made to it in connection with the Contemplated Transactions (including the existence and terms of the Contemplated Transaction). Notwithstanding the foregoing, for avoidance of doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with respect to the identification of the availability of, or securing of, available shares to borrow in order to effect any short sales or similar transactions in the future. Such Investor acknowledges that the representations, warranties and covenants contained in this Section 5.12 are being made for the benefit of the Investors as well as the Company and that each of the other Investors shall have an independent right to assert any claims against such Investor arising out of any breach or violation of the provisions of this Section 5.12.

 

 

6. Conditions to Closing; Termination.

 

6.1 Conditions to the Initial Investor’s Obligations to Purchase the Initial Units at the Initial Closing. The obligation of the Initial Investor to purchase the Initial Units at the Initial Closing is subject to the fulfillment, on or prior to the Initial Closing Date, of the following conditions, any of which may be waived by the Initial Purchaser:

 

(a) The representations and warranties made by the Company in Section 4 hereof qualified as to materiality shall be true and correct at all times prior to and on the Initial Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date, and, the representations and warranties made by the Company in Section 4 hereof not qualified as to materiality shall be true and correct in all material respects at all times prior to and on the Initial Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date. The Company shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to the Initial Closing Date.

 

(b) Since the date of this Subscription Agreement, there shall have not occurred any Material Adverse Effect with respect to the Company and its Subsidiaries.

 

(c) The Common Stock shall remain listed on the Nasdaq Capital Market or, if not so listed, shall be quoted on the OTC Bulletin Board.

 

(d) No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority or third party, in each case enjoining or preventing, or seeking to enjoin or prevent, the consummation of the transactions contemplated hereby or in the other Transaction Documents, or which would otherwise result in a Material Adverse Effect.

 

(e) The Company shall have executed and delivered the RRA Amendment.

 

(f) The Company shall have delivered a Certificate, executed on behalf of the Company by an executive officer, dated as of the Initial Closing Date, certifying (i) to the fulfillment of the conditions specified in subsections (a), (b), (c) and (d) of this Section 6.1.

 

(g) No stop order or suspension of trading shall have been imposed by the SEC or any other governmental or regulatory body with respect to public trading in the Common Stock.

 

 

6.2 Conditions to the Initial Investor’s Obligations to Purchase the Remaining Units at the Final Closing Date. The obligation of the Initial Investor to purchase the Remaining Units, if any, at the Final Closing Date, is subject to the fulfillment, on or prior to the Final Closing Date, of the following condition, which may be waived by the Initial Purchaser:

 

(a) Since the Initial Closing, there shall have not occurred any Material Adverse Effect with respect to the Company and its Subsidiaries.

 

6.3 Conditions to Additional Investors’ Obligations. The obligation of each Additional Investor to purchase the Units at the applicable Closing is subject to the fulfillment, on or prior to the applicable Closing Date, of the following conditions, any of which may be waived by such Investor (as to itself only):

 

(a) The representations and warranties made by the Company in Section 4 hereof qualified as to materiality shall be true and correct at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct as of such earlier date, and, the representations and warranties made by the Company in Section 4 hereof not qualified as to materiality shall be true and correct in all material respects at all times prior to and on the Closing Date, except to the extent any such representation or warranty expressly speaks as of an earlier date, in which case such representation or warranty shall be true and correct in all material respects as of such earlier date. The Company shall have performed in all material respects all obligations and covenants herein required to be performed by it on or prior to such Closing Date.

 

(b) Since the date of this Subscription Agreement, there shall have not occurred any Material Adverse Effect with respect to the Company and its Subsidiaries.

 

(c) The Common Stock shall remain listed on the Nasdaq Capital Market or, if not so listed, shall be quoted on the OTC Bulletin Board.

 

(d) No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority or third party, in each case enjoining or preventing, or seeking to enjoin or prevent, the consummation of the transactions contemplated hereby or in the other Transaction Documents, or which would otherwise result in a Material Adverse Effect.

 

(e) All conditions precedent to the Company’s obligation to consummate closing of the Transaction (other than the condition in respect of the consummation of the Initial Closing hereunder), including the approval of the Company’s stockholders, shall have been satisfied or, with the prior written consent of such Investor, waived (other than those conditions which, by their nature, are to be satisfied at the closing of the Transaction).

 

(f) The Company shall have executed and delivered the RRA Amendment.

 

 

(g) The Company shall have delivered a Certificate, executed on behalf of the Company by an executive officer, dated as of the applicable Closing Date, certifying (i) to the fulfillment of the conditions specified in subsections (a), (b), (c), (d) and (e) of this Section 6.3 and (ii) that immediately following receipt of the proceeds from the issuance and sale of the Units pursuant to this Agreement the Transaction is capable of being, and shall be, consummated in accordance with the terms and conditions of, and without any waiver of any obligations, breaches or defaults arising under, the Transaction Agreement.

 

(h) No stop order or suspension of trading shall have been imposed by the SEC or any other governmental or regulatory body with respect to public trading in the Common Stock.

 

6.4 Conditions to Obligations of the Company. The Company’s obligation to sell and issue the Units at the applicable Closing is subject to the fulfillment on or prior to the applicable Closing Date of the following conditions, any of which may be waived by the Company other than the condition set forth in Section 6.4(e); provided, however, that the obligation of the Company to sell and issue the Remaining Units to the Initial Investor at the Final Closing Date pursuant to Section 3.2 hereof shall not be subject to any conditions:

 

(a) The representations and warranties made by the Investors in Section 5 hereof, other than the representations and warranties contained in Sections 5.3 through 5.10, Section 5.12 and Section 5.13 (the “Investment Representations”), shall be true and correct in all material respects when made, and shall be true and correct in all material respects on the Closing Date with the same force and effect as if they had been made on and as of said date. The Investment Representations shall be true and correct in all respects when made, and shall be true and correct in all respects on the Closing Date with the same force and effect as if they had been made on and as of said date. The Investors shall have performed in all material respects all obligations and covenants herein required to be performed by them on or prior to the Closing Date.

 

(b) The Company shall have obtained any and all consents, permits, approvals, registrations and waivers necessary or appropriate for consummation of the purchase and sale of the Securities and the consummation of the other transactions contemplated by the Transaction Documents, all of which shall be in full force and effect.

 

(c) No judgment, writ, order, injunction, award or decree of or by any court, or judge, justice or magistrate, including any bankruptcy court or judge, or any order of or by any governmental authority, shall have been issued, and no action or proceeding shall have been instituted by any governmental authority, enjoining or preventing the consummation of the transactions contemplated hereby or in the other Transaction Documents.

 

(d) The Investors shall have executed and delivered the RRA Amendment.

 

(e) Each Investor shall have delivered the applicable Purchase Price to the Company.

 

 

6.5 Termination of Obligations to Effect Closing; Effects. The obligations of the Company, on the one hand, and each Investor, on the other hand, to effect the Closing shall terminate as follows:

 

(a) Upon the mutual written consent of the Company and such Investor;

 

(b) By the Company if any of the conditions set forth in Section 6.4 shall have become incapable of fulfillment, and shall not have been waived by the Company;

 

(c) By the Initial Investor if any of the conditions set forth in Section 6.1 or Section 6.2 shall have become incapable of fulfillment prior to the Initial Closing Date or the Final Closing Date, as applicable, and shall not have been waived by the Initial Investor;

 

(d) By an Additional Investor (with respect to itself only) if any of the conditions set forth in Section 6.3 shall have become incapable of fulfillment, and shall not have been waived by the Investor;

 

(e) If the Transaction Agreement terminates, without the consummation of the Transaction having occurred, for any reason; or

 

(f) In the case of the Initial Closing only, by either the Company or any Investor (with respect to itself only) if the Initial Closing has not occurred on or prior to December 31, 2020;

 

provided, however, that, except in the case of clauses (b) or (c) above, the party seeking to terminate its obligation to effect the Closing shall not then be in breach of any of its representations, warranties, covenants or agreements contained in this Agreement or the other Transaction Documents if such breach has resulted in the circumstances giving rise to such party’s seeking to terminate its obligation to effect the Closing. If this Agreement terminates following the delivery by the Initial Investor of the Purchase Price for the Units, the Company shall promptly return the applicable Purchase Price to the Initial Investor. Notwithstanding the foregoing, if the Initial Closing occurs, the obligations of each of (i) the Company to sell and issue the Remaining Units to the Initial Investor and (ii) the Initial Investor to purchase the Remaining Units from the Company, subject to the satisfaction of the condition set forth in Section 6.2, cannot be terminated without the prior written consent of Ribbon, such consent not to be unreasonably withheld or delayed.

 

7. Other Covenants and Agreements.

 

7.1 Reservation of Common Stock. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock a sufficient number of shares of Common Stock for issuance of the Conversion Shares upon conversion of the Debentures and for issuance of the Warrant Shares upon the exercise of the Warrants, free and clear of all encumbrances and restrictions, except for restrictions on transfer set forth in the Transaction Documents or imposed by applicable securities laws and except for those created by the Investors.

 

 

7.2 No Conflicting Agreements. Except in connection with Ribbon’s ability to redeem up to $5,000,000 in the aggregate of the Consideration Units (as defined in the Transaction Agreement) pursuant to the terms of the Investor Rights Agreement (as defined in the Transaction Agreement), the Company will not take any action, enter into any agreement or make any commitment that would conflict or interfere in any material respect with the Company’s obligations to the Investors under the Transaction Documents.

 

7.3 Listing. So long as Debentures and Warrants remain outstanding, the Company shall use commercially reasonable efforts to maintain in good standing the listing of the Common Stock for trading on the Nasdaq Stock Market or other national securities exchange.

 

7.4 Use of Proceeds. The Company shall use the net proceeds from the sale of the Units solely (i) to fund the consummation of the Transaction and the fees and expenses incurred in respect thereof, which shall include Ribbon’s option to use a portion of the proceeds from the sale of Units in excess of $50,000,000, if any, to effectuate its sale or redemption of up to $5,000,000 in the aggregate of the Consideration Units and (ii) for working capital and general corporate purposes of the Company and its Subsidiaries following the consummation of the Transaction.

 

7.5 Stockholder Approval. The Company shall provide each stockholder entitled to vote at a meeting of stockholders of the Company (the “Stockholder Meeting”), which shall be promptly called and held following the Initial Closing Date, a proxy statement meeting the requirements of Section 14 of the Exchange Act soliciting each such stockholder’s affirmative vote at the Stockholder Meeting for approval of resolutions approving the Company’s issuance of the Conversion Shares and the Warrant Shares (the “Stockholder Approval”) in accordance with applicable law, the rules and regulations of the Nasdaq Stock Market (or any other applicable market on which the Common Stock is then traded), the Certificate of Incorporation, the Company’s bylaws and the Delaware General Corporation Law, and the Company shall use its commercially reasonable best efforts to solicit its stockholders’ approval of such resolutions and to cause the Board of Directors to recommend to the stockholders that they approve such resolutions.

 

7.6. Ribbon Redemption. After the Company has sold and issued to Investors an aggregate of 50,000 Units hereunder, Ribbon shall be allowed to sell or redeem up to $5,000,000 in the aggregate of the Consideration Units received by Ribbon pursuant to the Transaction Agreement in accordance with the terms of the Investor Rights Agreement.

 

7.7. Capital Commitments. The Initial Investor and, if applicable, its assignee(s), are using and shall continue to use its and their respective reasonable best efforts to raise additional investments and/or capital commitments from its or their respective investors in an amount sufficient to permit the Initial Investor to purchase the Remaining Units, if any, at the Final Closing Date.

 

 

8. Survival and Indemnification.

 

8.1 Survival. The representations and warranties of the Company and the Investors contained in this Agreement shall survive for a period of twelve (12) months after the Initial Closing Date; provided, however, that the representations and warranties contained in Sections 4.1 through 4.5 and 5.2 through 5.10 of this Agreement shall survive the Closing Date indefinitely. The indemnified parties (as defined below) shall not be entitled to make any claim for indemnification with respect to such representations or warranties after the expiration of the applicable survival period; except that each claim initiated by an indemnified party prior to the expiration of the applicable survival period shall survive until it is settled or resolved.

 

8.2 Indemnification. The Company agrees to indemnify, reimburse and hold harmless each Investor and its Affiliates and their respective directors, officers, employees and agents from and against any and all losses, claims, damages, liabilities and expenses (including without limitation reasonable attorney fees and disbursements and other expenses incurred in connection with investigating, preparing or defending any action, claim or proceeding, pending or threatened and the costs of enforcement thereof) (collectively, “Losses”) to which such Person may become subject as a result of any breach of representation, warranty, covenant or agreement made by or to be performed on the part of the Company under the Transaction Documents, and will reimburse any such Person for all such amounts as they are incurred by such Person; provided, however, that such indemnifiable Losses shall not exceed the amount representing such Investor’s pro rata portion of the Purchase Price as set forth on the signature pages to this Agreement.

 

8.3 Conduct of Indemnification Proceedings. Any person entitled to indemnification hereunder shall (a) give prompt notice to the indemnifying party of any claim with respect to which it seeks indemnification and (b) in the case of a third party claim giving rise to such claim for indemnification, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided that any person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such person unless (i) the indemnifying party has agreed to pay such fees or expenses, or (ii) the indemnifying party shall have failed promptly to assume the defense of such claim and employ counsel reasonably satisfactory to such person or (iii) in the reasonable judgment of any such person, based upon written advice of its counsel, a conflict of interest exists between such person and the indemnifying party with respect to such claims (in which case, if the person notifies the indemnifying party in writing that such person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such person); and provided, further, that the failure of any indemnified party to give notice as provided herein shall not relieve the indemnifying party of its obligations hereunder, except to the extent that such failure to give notice shall materially adversely affect the indemnifying party in the defense of any such claim or litigation. It is understood that the indemnifying party shall not, in connection with any proceeding in the same jurisdiction, be liable for fees or expenses of more than one separate firm of attorneys at any time for all such indemnified parties. No indemnifying party will, except with the consent of the indemnified party, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect of such claim or litigation.

 

 

9. Miscellaneous.

 

9.1 Successors and Assigns. This Agreement may not be assigned by a party hereto without the prior written consent of the Company or the Required Consent of the Investors, as applicable; provided, however, that an Investor may assign its rights and delegate its duties hereunder in whole or in part to (a) an Affiliate or (b) a third party acquiring some or all of the Securities in a transaction complying with applicable securities laws, in each case without the prior written consent of the Company or the other Investors. The provisions of this Agreement shall inure to the benefit of and be binding upon the respective permitted successors and assigns of the parties and each Investor, before selling, assigning, pledging or otherwise disposing of any Debenture, shall require the recipient thereof to execute a joinder to this Agreement as set forth in such Debenture. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement. For the avoidance of doubt, an Investor who assigns its rights or delegates its duties hereunder shall not be relieved of its obligations under this Agreement. Notwithstanding anything to the contrary in this Section 9.1, the Initial Investor may assign in rights to complete the purchase of some or all of the Remaining Units, if any, at the Final Closing Date, provided such assignment shall not relieve the Initial Investor of its obligations to purchase the Remaining Units, if any, at the Final Closing Date, subject to the terms and conditions of this Agreement.

 

9.2 Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

9.3 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

 

9.4 Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given as hereinafter described (i) if given by personal delivery, then such notice shall be deemed given upon such delivery, (ii) if given by electronic mail, then such notice shall be deemed given upon transmittal thereof, if sent during the recipient’s normal business hours, and if not sent during normal business hours, then on the next Business Day, (iii) if given by mail, then such notice shall be deemed given upon the earlier of (A) receipt of such notice by the recipient or (B) three (3) days after such notice is deposited in first class mail, postage prepaid, and (iv) if given by an internationally recognized overnight air courier, then such notice shall be deemed given one Business Day after delivery to such carrier. All notices shall be addressed to the party to be notified at the address as follows, or at such other address as such party may designate by ten days’ advance written notice to the other party:

 

If to the Company:

 

American Virtual Cloud Technologies, Inc.

1720 Peachtree Street, Suite 629
Atlanta, GA 30309
Attention: Thomas H. King
Email: [email protected]

 

with a copy to:

 

Greenberg Traurig, LLP
1750 Tysons Boulevard, Suite 1000
McLean, VA 22102
Attention: Jason Simon
Email: [email protected]

 

If to the Investors:

 

to the addresses set forth on the signature pages hereto.

 

9.5 Expenses. The parties to this Agreement shall pay their own costs and expenses in connection herewith.

 

9.6 Amendments and Waivers. Prior to the Initial Closing, any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company, Ribbon and each Investor against which such amendment or waiver is to be applied or, following the Initial Closing, the Required Consent of the Investors. Any amendment or waiver effected in accordance with this paragraph shall be binding in accordance herewith upon the applicable holder of any Securities purchased under this Agreement at the time outstanding, each future holder of all such Securities, and the Company.

 

9.7 Publicity. Each Investor, severally and not jointly with the other Investors, covenants that until such time as the transactions contemplated by this Agreement are publicly disclosed by the Company, such Investor will maintain the confidentiality of the existence and terms of this transaction except to the extent disclosure is, in the reasonable judgment of an Investor that has a class of securities registered under Section 12 of the Exchange Act required to be disclosed under applicable securities laws and regulations.

 

 

9.8 Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof but shall be interpreted as if it were written so as to be enforceable to the maximum extent permitted by applicable law, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. To the extent permitted by applicable law, the parties hereby waive any provision of law which renders any provision hereof prohibited or unenforceable in any respect.

 

9.9 Entire Agreement. This Agreement, including the Annexes, Exhibits and the Disclosure Schedules, and the other Transaction Documents constitute the entire agreement among the parties hereof with respect to the subject matter hereof and thereof and supersede all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter hereof and thereof.

 

9.10 Further Assurances. The parties shall execute and deliver all such further instruments and documents and take all such other actions as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained.

 

9.11 Governing Law; Waiver of Jury Trial. This Agreement shall be governed by the internal law of the State of Delaware, without regard to conflict of law principles that would result in the application of any law other than the law of the State of Delaware. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.

 

9.12 Independent Nature of Investors’ Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. The decision of each Investor to purchase Securities pursuant to the Transaction Documents has been made by such Investor independently of any other Investor. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents. Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents. Each Investor shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that each of the Investors has been provided with the same Transaction Documents for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.

 

9.13 Third-Party Beneficiary. Ribbon is an intended third-party beneficiary of this Agreement, and shall have the ability to enforce the rights of the Company hereunder .

 

[Remainder of page intentionally left blank; signature page follows.]

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement or caused their duly authorized officers to execute this Agreement as of the date first above written.

 

The Company:

 

AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC.

 

By:	/s/ Thomas H. King
Name:	Thomas H. King
Title:	Chief Financial Officer

 

Signature Page to Securities Purchase Agreement

 

 

Initial Investor:

 

	SPAC OPPORTUNITY PARTNERS INVESTMENT SUB LLC
	By:	/s/ Robert E. Willis
	Name:	Robert E. Willis
	Title:	Managing Member

 

Address for

Notice:	SPAC Opportunity Partners Investment Sub LLC
	2870 Peachtree Road NW
	Atlanta, GA 30305

 

Signature Page to Securities Purchase Agreement

 

 

Solely for purposes of Section 6.5 and Section 9.6:

 

	RIBBON COMMUNICATIONS INC.
	By:	/s/ Bruce McClelland
	Name:	Bruce McClelland
	Title:	President & Chief Executive Officer

 

Address for

Notice:	4 Technology Park Drive
	Westford, Massachusetts 01886

 

Signature Page to Securities Purchase Agreement

 

 

Additional Investors:
Signature block for entities:
[name of entity]

 

By:
	Name:
	Title:

 

Address:
Email:

 

Signature block for individuals:
Print Name:

 

Address:
Email:

 

Aggregate
Purchase Price:	$
Number of
Units:

 

Address for
Notice:

 

Signature Page to Securities Purchase Agreement

 

 

EXHIBIT A

FORM OF DEBENTURE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT B

 

FORM OF WARRANT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXHIBIT C

 

FORM OF REGISTRATION RIGHTS AGREEMENT AMENDMENT

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exhibit 10.6

 

EXECUTION VERSION

 

AMENDMENT AND JOINDER

TO REGISTRATION RIGHTS AGREEMENT

 

This Amendment and Joinder (this “Amendment and Joinder”), entered into and effective as of December 1, 2020, is made to that certain Registration Rights Agreement, dated as of April 7, 2020, by and among American Virtual Cloud Technologies, Inc., a Delaware corporation (the “Company”), and the other parties thereto (the “RRA”). This Amendment and Joinder is entered into by and among the Company, the undersigned parties listed under the heading “Original Holders” on the signature page hereto, and SPAC Opportunity Partners Investment Sub LLC (the “Initial Investor”). Capitalized terms used herein but not otherwise defined herein shall have the meanings ascribed to them in the RRA.

 

W I T N E S S E T H:

 

WHEREAS, concurrently with the execution and delivery of this Amendment and Joinder, the Company is consummating the “Initial Closing” pursuant to, and as such term is defined in, that certain Securities Purchase Agreement, dated as of even date herewith (the “Purchase Agreement”), by and among the Company, the Initial Investor and, for the limited purposes set forth therein, Ribbon Communications Inc.;

 

WHEREAS, it is a condition to the consummation of the Initial Closing under the Purchase Agreement that the RRA be amended as provided herein, and that the Initial Investor become a party to the RRA, as amended hereby;

 

WHEREAS, pursuant to Section 6.7 of the RRA, subject to certain inapplicable exceptions, any term of the RRA may be amended by the written consent of the Company and holders of at least sixty-six and two-thirds percent (66-2/3%) of the Registrable Securities (including MasTec or Stratos if it then holds Registrable Securities) (the “Required Holders”); and

 

WHEREAS, in order to induce the Initial Investor to consummate the Initial Closing under the Purchase Agreement, the Company and the undersigned Holders, who collectively constitute the Required Holders, desire to amend the RRA as set forth herein.

 

NOW, THEREFORE, in exchange for good and valuable consideration including, without limitation, the mutual covenants contained herein, the sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Company and the undersigned Holders and the Initial Investor hereby agree as follows:

 

1. Amendments to Agreement. The following definitions set forth in Section 1 of the RRA are hereby deleted in their entireties and replaced with the following in substitution therefor:

 

 

“Debentures” means, collectively, (i) the Company’s Series A convertible debentures  issued on or about April 7, 2020, in connection with the BCA or pursuant to that certain Securities Purchase Agreement, dated April 3, 2020, among the Company and certain of the Holders, and (ii) the Company’s Series A-1 convertible debentures issued on or after the date hereof pursuant to the Purchase Agreement.

 

“PIPE Warrants” means, collectively, the warrants to purchase shares of the Common Stock, at an exercise price of $0.01 per whole share, issued (i) on or about April 7, 2020, in connection with the BCA or pursuant to that certain Securities Purchase Agreement, dated April 3, 2020, among the Company and certain of the Holders, or (ii) on or after the date hereof pursuant to the Purchase Agreement.

 

2. Joinder. The Initial Investor hereby agrees to be bound by all of the terms, conditions and provisions of, and shall be deemed a party to (as if it was an original signatory to), the RRA, as amended hereby. From and after the date hereof, the Initial Investor shall be a “Holder” for all purposes under the RRA, as amended hereby. The Holders acknowledge and agree that any Additional Investors (as such term is defined in the Subscription Agreement) may be added as additional parties to the RRA as “Holders” for all purposes thereunder, by signing a joinder to the RRA in form and substance approved by the Company.

 

3. Miscellaneous.

 

3.1 Except as expressly amended by this Amendment, the terms and provisions of the RRA shall continue in full force and effect. No reference to this Amendment need be made in any instrument or document making reference to the RRA; any reference to the RRA in any such instrument or document shall be deemed a reference to the RRA as amended hereby. The RRA as amended hereby shall be binding upon the parties thereto and their respective assigns and successors.

 

3.2 This Amendment may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement.

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment and Joinder as of the date first written above.

 

	AMERICAN VIRTUAL CLOUD TECHNOLOGIES, INC.
	By:	/s/ Thomas H. King
	Name:	Thomas H. King
	Title:	Chief Financial Officer

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment and Joinder as of the date first written above.

 

	SPAC OPPORTUNITY PARTNERS INVESTMENT SUB LLC
	By:	/s/ Robert E. Willis
	Name:	Robert E. Willis
	Title:	Managing Director

 

	Address:

  

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment and Joinder as of the date first written above.

ORIGINAL HOLDERS:

 

	Signature block for entities:
	STRATOS MANAGEMENT SYSTEMS HOLDINGS, LLC
	By:	/s/ Lawrence E. Mock
		Name:	Lawrence E. Mock
		Title:	Managing Member
	Address:
	Email:

 

 

	PENSARE SPONSOR GROUP, LLC
	By:	/s/ Robert E. Willis
		Name:	Robert E. Willis
		Title:	Manager
	Address:
	Email:

 

 

	GREENBERG TRAURIG, P.A.
	By:	/s/ Jason Simon
		Name:	Jason Simon
		Title:	Shareholder
	Address:
	Email:

 

 

7

 

Exhibit 10.7 

 

SIXTH AMENDMENT TO LOAN DOCUMENTS

 

THIS SIXTH AMENDMENT TO LOAN DOCUMENTS (this “Amendment”), dated as of December 1, 2020, is among Stratos Management Systems, Inc. (f/k/a Tango Merger Sub Corp.), a Delaware corporation (“Stratos”), American Virtual Cloud Technologies, Inc. (f/k/a Pensare Acquisition Corp.), a Delaware corporation (“Parent” and together with Stratos, collectively and individually, “Borrower”), COMPUTEX, INC., a Texas corporation (“Computex”), FIRST BYTE COMPUTERS, INC., a Minnesota corporation (“First Byte”), ENETSOLUTIONS, L.L.C., a Texas limited liability company (“eNET”, and together with Computex and First Byte, collectively, “Existing Guarantors”, and each, individually, an “Existing Guarantor”), AVCTECHNOLOGIES USA INC., a Delaware corporation (“AVC”), and KANDY COMMUNICATIONS LLC, a Delaware limited liability company (“KC”, and together with AVC, the “New Guarantors”, and each individually, a “New Guarantor”, and together with the Existing Guarantors, the “Guarantors” and individually, a “Guarantor”), and COMERICA BANK (“Bank”).

 

RECITALS:

 

A. Borrower and Bank are party to that certain Credit Agreement dated as of December 18, 2017 (as the same has been or may hereafter be amended, restated or otherwise modified from time to time, the “Credit Agreement”).

 

B. In connection with the Credit Agreement, (i) Borrower and the Existing Guarantors (other than Parent) are party to that certain Security Agreement dated as of December 18, 2017 in favor of Bank, (ii) Parent is party to that certain Security Agreement dated as of April 7, 2020 in favor of Bank and (iii) New Guarantors are party to that certain Security Agreement dated as of the date hereof in favor of Bank (collectively, as the same have been or may be amended, restated or modified from time to time, the “Security Agreement”).

 

C. In connection with the Credit Agreement, (i) the Existing Guarantors (other than Parent) are party to that certain Guaranty dated as of December 18, 2017 in favor of Bank, and (ii) Parent is party to that certain Guaranty dated as of April 7, 2020 in favor of Bank and (iii) New Guarantors are party to that certain Guaranty dated as of the date hereof in favor of Bank (collectively, as the same have been or may hereafter be amended, restated or otherwise modified from time to time, the “Guaranties”).

 

D. In connection with the Credit Agreement, the Borrower and Existing Guarantors are party to that certain Advance Formula Agreement dated as of December 18, 2017 (as the same has been or may hereafter be amended, restated or otherwise modified from time to time, the “Advance Formula Agreement”).

 

E. Borrower, Guarantors, and Bank now desire to amend the Credit Agreement and the other Loan Documents as provided herein.

 

NOW, THEREFORE, in consideration of the premises herein contained and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows (all provisions of this Amendment being effective as of the date hereof unless otherwise stated herein):

 

 

ARTICLE I

Definitions

 

Section 1.1 Definitions. Capitalized terms used in this Amendment, to the extent not otherwise defined herein, shall have the same meanings as in the Credit Agreement, as amended hereby.

 

ARTICLE II

Amendments to Loan Documents

 

Section 2.1 Additions to Definitions in Section 1(a) of the Credit Agreement. The following definitions are hereby added to Section 1(a) of the Credit Agreement in alphabetical order in their entirety as follows:

 

“2020 Subscription Agreement” shall mean that certain Securities Purchase Agreement dated as of [December 1], 2020 by and among AVCT, SPAC Opportunity Partners Investment Sub LLC, Ribbon Communications Inc. and the other parties thereto.

 

“AVCT” shall mean ACVtechnologies USA Inc., a Delaware corporation.

 

“KC Acquisition” shall mean the acquisition by AVCT of certain assets of the RC Sellers pursuant to the terms and conditions of the KC Purchase Agreement.

 

“KC Purchase Agreement” shall mean that certain Amended and Restated Purchase Agreement dated as of [December 1], 2020 by and among RC Sellers and Parent.

 

“RC Sellers” shall mean, collectively, Ribbon Communications Inc., a Delaware corporation, Ribbon Communications Operating Company, Inc., a Delaware corporation, and Ribbon Communications International Limited, an Ireland company.

 

“Sixth Amendment Effective Date” shall mean December ___, 2020.

 

“TSA Agreement” shall mean that certain Transition Services Agreement dated as of [December 1], 2020 by and between Parent and Ribbon Communications Operating Company, Inc.

 

Section 2.2 Amendment to Definitions in Section 1(a) of the Credit Agreement. The following definition in Section 1(a) of the Credit Agreement is amended and restated to read in its entirety as follows:

 

 

“2020 Subordinated Debt” shall mean the Debt owed by Parent, Borrower and Borrower’s Subsidiaries pursuant to the following documents: (a) the Securities Purchase Agreement dated on or about the Third Amendment Effective Date, by and among Parent and the investors party thereto and any and all convertible debentures (including any such debentures issued following the Third Amendment Effective Date in accordance with the terms of such Securities Purchase Agreement) and warrants to purchase common stock issued pursuant thereto; (b) any other convertible debentures and warrants having substantially the same terms, conditions and subordination provisions as the debentures and warrants issued pursuant to the foregoing clause (a) issued pursuant to one or more agreements entered into on or after the Fifth Amendment Effective Date; (c) the Registration Rights Agreement dated on or about the Third Amendment Effective Date, by and among Parent and the holders party thereto; (d) the subordinated promissory notes dated on or about or within 60 days following, the Third Amendment Effective Date in an amount not to exceed $7,000,000 in the aggregate, by Parent in favor of certain holders party thereto and issued in settlement of certain obligations of Parent to the holders thereof as evidenced by letter agreements (or other agreements evidencing such settlements) dated on or about or within 60 days following, the Third Amendment Effective Date between Parent and each holder of such subordinated promissory notes; and (e) any other documents, agreement, and instruments related thereto; provided, however, that the aggregate principal amount of any convertible debentures issued pursuant to the foregoing clauses (a) and (b) shall not exceed, in the aggregate, $200,000,000.

 

Section 2.3 Addition to Section 2 of the Credit Agreement. A new clause (d) is added to the end of Section 2 of the Credit Agreement to read in its entirety as follows:

 

(d) Mandatory Prepayments.

 

(i) Subject to clause (ii) below, immediately upon receipt by any Loan Party of any net cash proceeds from the issuance of any Equity Interests of such Loan Party or from the issuance of any Subordinated Debt in an aggregate amount equal to or greater than $12,500,000, Borrower shall make a prepayment to Bank in an amount equal to $250,000 for the first $12,500,000 of net cash proceeds received and thereafter, prepayments of $250,000 for each additional incremental $12,500,000 of net cash proceeds received by Borrower.

 

(ii) Each mandatory prepayment under this clause (d) shall be applied to the Indebtedness in such order and manner as determined by Bank. No prepayment penalty or premium shall be required with respect to any mandatory prepayment made pursuant to this clause (d); provided however, the foregoing shall in no way limit the obligation of Borrower to reimburse Bank, on demand, for any resulting loss, cost or expense incurred by Bank as a result of Borrower making any prepayment of Indebtedness bearing interest at the LIBOR-based Rate (as defined in the Revolving Credit Note and Term Note, as applicable) on any date other than the last day of the Interest Period (as defined in the Revolving Credit Note and Term Note, as applicable) applicable thereto, in accordance with the provisions of the Revolving Credit Note and Term Note, as applicable.

 

Section 2.4 Addition to Section 4(k) of the Credit Agreement. A new sentence is added to the end of Section 4(k) of the Credit Agreement to read in its entirety as follows:

 

 

Notwithstanding anything to the contrary contained in this clause (k), AVCT may permit RC Sellers to receive collections and receipts of AVCT and its Subsidiaries in accordance with the TSA Agreement for the period beginning on the Sixth Amendment Effective Date through and including [December 1], 2021.

 

Section 2.5 Amendment to Section 4(m) of the Credit Agreement. Section 4(m) of the Credit Agreement is amended and restated to read in its entirety as follows:

 

(m) 2020 Subscription Agreement and other Funds. Upon receipt of any proceeds under the 2020 Subscription Agreement or any proceeds from any other Subordinated Debt issuances or issues of Equity Interests, Borrower shall promptly deposit all such proceeds into a deposit account maintained with Bank.

 

Section 2.6 Amendment to Section 5(a) of the Credit Agreement. The period at the end of Section 5(a) of the Credit Agreement is deleted and the following is inserted in lieu thereof:

 

, and (iv) the redemption of up to $5,000,000 of convertible debentures issued to the RK Sellers, in accordance with the terms of the KC Purchase Agreement and that certain Investor Rights Agreement dated as of [December 1, 2020] by and among Parent, Ribbon Communications, Inc. and the other parties thereto, in each case, as in effect as of the Sixth Amendment Effective Date, so long as no Event of Default has occurred and is continuing or would result therefrom.

 

Section 2.7 Amendment to Section 5(i) of the Credit Agreement. The period at the end of Section 5(i) of the Credit Agreement is deleted and the following is inserted in lieu thereof:

 

, and (vii) the KC Acquisition.

 

ARTICLE III

 

No Waiver

 

Section 3.1 No Waiver. Nothing contained herein shall be construed as a consent to or waiver of any Default or Event of Default, which may now exist or hereafter occur or any violation of any term, covenant or provision of the Credit Agreement or any other Loan Document. All rights and remedies of Bank are hereby expressly reserved with respect to any such Default or Event of Default. Nothing contained herein shall affect or diminish the right of Bank to require strict performance by each Loan Party of each provision of any Loan Document to which such Loan Party is a party, except as expressly provided herein. Except as amended hereby, all terms and provisions and all rights and remedies of Bank under the Loan Documents shall continue in full force and effect and are hereby confirmed and ratified in all respects.

 

ARTICLE IV

Conditions Precedent

 

Section 4.1 Conditions Precedent. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent:

 

 

 

(a) Bank shall have received this Amendment properly executed by Borrower, Guarantors and Bank.

 

(b) Bank shall have a Guaranty, a Security Agreement and an Intellectual Property Security Agreement executed by the New Guarantors and in favor of Bank, all in form and substance satisfactory to Bank.

 

(c) Bank shall have received any and all guaranties, security agreements, pledge agreements, assignments, financing statements and other documents requested by Bank to evidence the Indebtedness or to create, protect or perfect the Liens upon the Collateral required by Bank as security for the Indebtedness and to accord Bank a perfected security position in the Collateral, subject only to Permitted Encumbrances.

 

(d) Bank shall have received true, correct and complete copies of the 2020 Subscription Agreement and all documents, instruments and other agreements executed in connection therewith, all of which shall be in form and substance satisfactory to Bank.

 

(e) Bank shall have received true, correct and complete copies of the KC Purchase Agreement and all documents, instruments and other agreements executed in connection therewith, including without limitation, the TSA Agreement, all of which shall be in form and substance satisfactory to Bank.

 

(f) Bank shall have received UCC searches, evidence of insurance, evidence of title and such other information as Bank may reasonably require, and all of the foregoing shall be in form and content acceptable to Bank.

 

(g) Bank shall have received copies of the organizational documents and evidence of existence, good standing, qualification to conduct business and authority for each New Guarantor and signatory on behalf of each New Guarantor.

 

(h) The representations and warranties contained herein and in all other Loan Documents, as amended hereby, shall be true and correct in all material respects as of the date hereof as if made on the date hereof.

 

(i) No Default or Event of Default shall have occurred and be continuing.

 

(j) Bank shall have received payment of an amendment fee in an amount equal to $10,000, which amendment fee is deemed fully earned, due and payable as of the date hereof.

 

ARTICLE V

Ratifications, Representations and Warranties

 

Section 5.1 Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Credit Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Credit Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. Each of Borrower, Guarantors and Bank agree that the Credit Agreement, as amended hereby, and the other Loan Documents shall continue to be legal, valid, binding and enforceable in accordance with their respective terms. Each Guarantor hereby consents and agrees to this Amendment and agrees that each Loan Document to which such Person is a party shall remain in full force and effect and shall continue to (a) in the case of the Guaranty, guarantee the Indebtedness (as defined in the Guaranty) and the other amounts and obligations as provided in the Guaranty, and (b) be the legal, valid and binding obligation of such Person and enforceable against such Person in accordance with its terms.

 

 

Section 5.2 Representations and Warranties. Each of Borrower and Guarantors hereby represents and warrants to the Bank that (a) with respect to Borrower, the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite company or other action on the part of Borrower and will not violate the charter or organizational documents of Borrower, (b) the representations and warranties contained in the Credit Agreement and each other Loan Document are true and correct in all material respects on and as of the date hereof as though made on and as of the date hereof (except for such representations and warranties as are limited by their express terms to a specific date), and (c) effective upon the execution of this Amendment and the Loan Documents executed in connection herewith, no Default or Event of Default has occurred and is continuing.

 

ARTICLE VI

Miscellaneous

 

Section 6.1 Survival of Representations and Warranties. All representations and warranties made in this Amendment or any other document executed in connection herewith shall survive the execution and delivery of this Amendment, and no investigation by Bank or any closing shall affect the representations and warranties or the right of Bank to rely upon them.

 

Section 6.2 Reference to Agreement. Each of the Credit Agreement, the Loan Documents and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Credit Agreement and the Loan Documents, as amended hereby, are hereby amended so that any reference in such documents to the Credit Agreement and the Loan Documents shall mean a reference to the Credit Agreement and the Loan Documents as amended hereby.

 

Section 6.3 Expenses of Bank. As provided in the Credit Agreement, each of Borrower agrees to pay on written demand all reasonable and documented costs and expenses incurred by Bank in connection with the preparation, negotiation, and execution of this Amendment and any other documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including without limitation the reasonable costs and fees of Bank’s legal counsel, and all costs and expenses incurred by Bank in connection with the enforcement or preservation of any rights under the Credit Agreement, as amended hereby, or any other document executed in connection therewith, including without limitation the costs and reasonable fees of Bank’s legal counsel.

 

 

Section 6.4 Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

 

Section 6.5 Applicable Law. This Amendment and all other documents executed pursuant hereto shall be deemed to have been made and to be performable in Dallas, Dallas County, Texas and shall be governed by and construed in accordance with the laws of the State of Texas.

 

Section 6.6 Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of Bank, each Borrower, each Guarantor, and their respective successors, assigns, heirs, executors and personal representatives, except neither Borrower, nor any Guarantor may assign or transfer any of its rights or obligations hereunder without the prior written consent of Bank.

 

Section 6.7 Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same agreement. The signature of a party to any counterpart shall be sufficient to legally bind such party. Bank may remove the signature pages from one or more counterparts and attach them to any other counterpart for the purpose of having a single document containing the signatures of all parties. Delivery of an executed counterpart of a signature page to this Amendment by facsimile, emailed portable document format (“pdf”), or tagged image file format (“tiff”) or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of an original executed counterpart of a signature page to this Amendment. Any party sending an executed counterpart of a signature page to this Amendment by facsimile, pdf, tiff or any other electronic means shall also send the original thereof to Bank within five (5) days thereafter, but failure to do so shall not affect the validity, enforceability, or binding effect of this Amendment.

 

Section 6.8 Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

 

Section 6.9 ENTIRE AGREEMENT. THE CREDIT AGREEMENT, THIS AMENDMENT AND ALL OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THE CREDIT AGREEMENT OR THIS AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO ORAL AGREEMENTS AMONG THE PARTIES HERETO.

 

 

Section 6.10 INDEMNIFICATION OF BANK. EACH OF THE LOAN PARTIES HEREBY AGREES TO INDEMNIFY BANK AND EACH AFFILIATE THEREOF AND THEIR RESPECTIVE OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES, ATTORNEYS, AFFILIATES, AND AGENTS (COLLECTIVELY, “RELEASED PARTIES”) FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS’ FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (a) ANY AND ALL FAILURES BY SUCH LOAN PARTY TO COMPLY WITH ITS AGREEMENTS CONTAINED IN THE LOAN DOCUMENTS, (b) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS PRIOR TO THE DATE HEREOF, (c) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS PRIOR TO THE DATE HEREOF, (d) ANY BREACH PRIOR TO THE DATE HEREOF BY SUCH LOAN PARTY OR SUMMIT OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS OR (e) ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING RELATING TO ANY OF THE FOREGOING (COLLECTIVELY, “RELEASED CLAIMS”). WITHOUT LIMITING ANY PROVISION OF THIS AMENDMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS’ FEES) ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH PERSON; PROVIDED, HOWEVER, NO PERSON SHALL BE INDEMNIFIED HEREUNDER FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

 

Section 6.11 WAIVER AND RELEASE. TO INDUCE BANK TO AGREE TO THE TERMS OF THIS AMENDMENT, EACH OF THE LOAN PARTIES REPRESENTS AND WARRANTS THAT AS OF THE DATE OF THIS AMENDMENT IT OR HE HAS NO CLAIMS AGAINST RELEASED PARTIES AND IN ACCORDANCE THEREWITH IT:

 

(a) WAIVER. WAIVES ANY AND ALL SUCH CLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING PRIOR TO THE DATE OF THIS AMENDMENT; AND

 

(b) RELEASE. RELEASES, ACQUITS AND FOREVER DISCHARGES RELEASED PARTIES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE STATE AND FEDERAL LAW, FROM ANY AND ALL OBLIGATIONS, INDEBTEDNESS, LIABILITIES, CLAIMS, COUNTERCLAIMS, CONTROVERSIES, COSTS, DEBTS, SUMS OF MONEY, ACCOUNTS, BONDS, BILLS, RIGHTS, CAUSES OF ACTION OR DEMANDS WHATSOEVER, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, IN LAW OR EQUITY, WHICH SUCH LOAN PARTY EVER HAD, NOW HAS, CLAIMS TO HAVE OR MAY HAVE AGAINST ANY RELEASED PARTY ARISING PRIOR TO THE DATE HEREOF AND FROM OR IN CONNECTION WITH THIS AMENDMENT, THE LOAN DOCUMENTS OR THE TRANSACTIONS DIRECTLY OR INDIRECTLY CONTEMPLATED THEREBY.

 

Section 6.12 COVENANT NOT TO SUE. EACH OF THE LOAN PARTIES FURTHER COVENANTS NOT TO SUE THE RELEASED PARTIES ON ACCOUNT OF ANY OF THE RELEASED CLAIMS, AND EXPRESSLY WAIVES ANY AND ALL DEFENSES IT OR HE MAY HAVE IN CONNECTION WITH ITS OR HIS OBLIGATIONS UNDER THIS AMENDMENT OR THE OTHER LOAN DOCUMENTS. THIS SECTION IS IN ADDITION TO AND SHALL NOT IN ANY WAY LIMIT ANY OTHER RELEASE, COVENANT NOT TO SUE, OR WAIVER BY SUCH LOAN PARTY IN FAVOR OF THE RELEASED PARTIES.

 

[Remainder of Page Intentionally Left Blank. Signature Pages Follow.]

 

 

Executed as of the date first written above.

 

	BORROWER:
	Stratos Management Systems, Inc. (f/k/a Tango Merger Sub Corp.) and
	By:	/s/ Thomas H. King
		Thomas H. King
		Treasurer and Secretary
	American Virtual Cloud Technologies, Inc.
	(f/k/a Pensare Acquisition Corp.)
	By:	/s/ Thomas H. King
		Thomas H. King
		Chief Financial Officer
	GUARANTORS:
	COMPUTEX, INC.
	FIRST BYTE COMPUTERS, INC.
	eNETsolutions, L.L.C.
	KANDY COMMUNICATIONS LLC
	By:	/s/ Thomas H. King
		Thomas H. King
		Treasurer and Secretary of each entity listed above
	AVCTECHNOLOGIES USA INC.
	By:	/s/ Thomas H. King
		Thomas H. King
		Chief Financial Officer
	BANK:
	COMERICA BANK
	By:	/s/ Chris D. Reed
		Chris D. Reed
		Vice President

 

 

9

 

Exhibit 10.8

 

Employment Agreement

 

This Employment Agreement (this "Agreement") is made effective as of December 1, 2020 by and between American Virtual Cloud Technologies, Inc. ("The Company") of 1720 Peachtree Street, Suite 629, Atlanta, Georgia, 30309 and Michael Dennis, ("Mr. Dennis”), of 95 West Main Street, 5-261, Chester, NJ 07930.

 

The Company is engaged in the business of Information Technology Services. Mr. Dennis will primarily perform the job duties at the following location: 1298 Waterford Green Trail, Marietta, GA 30068.

 

A.

The Company desires to have the services of Mr. Dennis.

 

B.

Mr. Dennis is willing to be employed by The Company.

 

Therefore, the parties agree as follows:

 

EMPLOYMENT. The Company shall employ Mr. Dennis as Chief Operating Officer. Mr. Dennis accepts and agrees to such employment, and agrees to be subject to the general supervision, advice and direction of The Company and the Company's Board of Directors.

 

BEST EFFORTS OF EMPLOYEE. Mr. Dennis agrees to perform faithfully, industriously, and to the best of his ability, experience, and talents, all of the duties that may be required by the express and implicit terms of this Agreement, to the reasonable satisfaction of The Company. Such duties shall be provided at such place(s) as the needs, business, or opportunities of The Company may require from time to time. Mr. Dennis shall devote his full business time to the rendition of such Services, subject to absences for customary vacations and for temporary illness. In addition, Mr. Dennis will not engage in any other gainful occupation which requires his personal attention and/or creates a conflict of interest with job responsibilities under this Agreement without the prior approval of the Board, with the exception that Mr. Dennis may personally trade in stock, bonds, securities, commodities or real estate investments for his own benefit.

 

COMPENSATION OF EMPLOYEE. As compensation for the services provided by Mr. Dennis under this Agreement, The Company will pay Mr. Dennis an annual salary of $420,000 payable in accordance with the Company's usual payroll procedures. Upon termination of this Agreement, payments under this paragraph shall cease; provided, however, that Mr. Dennis shall be entitled to payments for periods or partial periods that occurred prior to the date of termination and for which Mr. Dennis has not yet been paid, and for any commission earned in accordance with The Company' customary procedures, if applicable. Accrued vacation will be paid in accordance with state law and The Company' customary procedures. This section of the Agreement is included only for accounting and payroll purposes and should not be construed as establishing a minimum or definite term of employment.

 

 

The Company may award Mr. Dennis an At-Risk Annual bonus (the Bonus), in an amount up to 100% of his starting base salary. Such Bonus will be based on personal and corporate performance factors agreed upon by The Company.

 

Additionally, The Company will award Mr. Dennis, subject to approval of the Company’s Board of Directors, 300,000 Restricted Stock Units under the Company’s Equity Incentive Plan.

 

EXPENSE REIMBURSEMENT. The Company will reimburse Mr. Dennis for "out-of-pocket" expenses incurred in accordance with the Company's policies in effect from time to time.

 

RECOMMENDATIONS FOR IMPROVING OPERATIONS. Mr. Dennis shall

provide The Company with all information, suggestions, and recommendations regarding The Company's business, of which Mr. Dennis has knowledge, that will be of benefit to The Company.

 

CONFIDENTIALITY. The Company recognizes that Mr. Dennis has and will have information regarding the following:

-

inventions

-

products

-

product design

-

processes

-

technical matters

-

trade secrets

-

copyrights

-

customer lists

-

prices

-

costs

-

business affairs

-

future plans

 

and other vital information items (collectively, "Information") which are valuable, special and unique assets of The Company. Mr. Dennis agrees that he will not at any time or in any manner, either directly or indirectly, divulge, disclose, furnish, make accessible, or communicate any Information to any third party without the prior written consent of The Company. Mr. Dennis will protect the Information and treat it as strictly confidential. A violation by Mr. Dennis of this paragraph shall be a material violation of this Agreement and will justify legal and/or equitable relief.

 

This Agreement is in compliance with the Defend Trade Secrets Act and provides civil or criminal immunity to any individual for the disclosure of trade secrets: (i) made in confidence to a federal, state, or local government official, or to an attorney when the disclosure is to report suspected violations of the law; or (ii) in a complaint or other document filed in a lawsuit if made under seal.

 

UNAUTHORIZED DISCLOSURE OF INFORMATION. If it appears that Mr. Dennis has disclosed (or has threatened to disclose) Information in violation of this Agreement, The Company shall be entitled to an injunction to restrain Mr. Dennis from disclosing, in whole or in part, such Information, or from providing any services to any party to whom such Information has been disclosed or may be disclosed. The Company shall not be prohibited by this provision from pursuing other remedies, including a claim for losses and damages, attorneys' fees and costs incurred while seeking to enforce this Agreement.

 

 

CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT. The confidentiality provisions of this Agreement shall remain in full force and effect for a two-year period after the termination of Mr. Dennis's employment. During such two-year period, neither party shall make or permit the making of any public announcement or statement of any kind regarding Mr. Dennis's employment by or connection with The Company.

 

INTELLECTUAL PROPERTY RIGHTS. All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Mr. Dennis, individually or in conjunction with others, during his employment by The Company (whether during business hours or otherwise and whether on The Company' premises or otherwise) which relate to The Company's business, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks), and all writings or materials of any type embodying any of such items, shall be disclosed to The Company and are and shall be the sole and exclusive property of The Company.

 

NON-COMPETE AGREEMENT. Mr. Dennis agrees and covenants that during his employment by The Company and for a period of one-year following the termination of Mr. Dennis's employment, whether such termination is voluntary or involuntary, Mr. Dennis will not directly or indirectly engage in any business competitive with The Company.

 

Directly or indirectly engaging in any competitive business includes, but is not limited to: (i) engaging in a business as owner, partner, or agent, (ii) becoming an employee, rendering advice or offering services to any third party that is engaged in such business, (iii) becoming interested directly or indirectly in any such business, or (iv) soliciting any customer or current Executive or Employee of The Company for the benefit of a third party that is engaged in such business. Mr. Dennis agrees that this non-compete provision will not adversely affect Mr. Dennis's livelihood.

 

During the Employment Period, Mr. Dennis will devote his full-time efforts to the business of The Company and will not engage in consulting work or any trade or business for his own account or for or on behalf of any other person, firm or corporation that competes, conflicts or interferes with the performance of his duties under this Agreement.

 

BENEFITS. Mr. Dennis shall be entitled to standard and customary employment benefits, including holidays, officer liability and indemnification insurance, vacation, health insurance, disability insurance and life insurance as provided by The Company policies in effect from time to time.

 

 

TERM/TERMINATION. Mr. Dennis's employment under this Agreement shall be for an unspecified term on an "at will" basis. This Agreement may be terminated by The Company upon No written notice, and by Mr. Dennis upon Two weeks written notice. If The Company shall so terminate this Agreement, Mr. Dennis shall be entitled to compensation for One year of base salary. bonus and benefits (including health care and life insurance as applicable) beyond the termination date of such termination, unless Mr. Dennis is in violation of this Agreement. If Mr. Dennis is in violation of this Agreement, The Company may terminate employment with cause without notice and with compensation to Mr. Dennis only to the date of such termination. As used in this Agreement, the term "Cause" shall include, without limitation: insubordination; dishonest; fraud; serious dereliction of duty; criminal activity; acts of moral turpitude; conviction of a felony, plea of guilty or nolo contendere to a felony charge or any criminal act involving moral turpitude. The compensation paid under this Agreement shall be Mr. Dennis's exclusive remedy. If Mr. Dennis's employment is terminated by The Company without cause, Mr. Dennis shall continue to receive his base salary, bonus and benefits (including health care and life insurance as applicable) for a period of One year of base salary from the effective date of termination (the "Severance Period").

 

The salary and fringe benefits to be paid are referred to herein as the "Termination Compensation." Mr. Dennis shall not be entitled to any Termination Compensation unless: (i) Mr. Dennis complies with all surviving provisions of any non-competition agreement, non-solicitation agreement, confidentiality agreement or inventions assignment agreement that Mr. Dennis signed, and (ii) Mr. Dennis executes and delivers to The Company, after a notice of termination, a release in form and substance acceptable to The Company, by which Mr. Dennis releases The Company from any obligations and liabilities of any type whatsoever under this Agreement, except for The Company' obligations with respect to the Termination Compensation, and that release shall not affect Mr. Dennis's right to indemnification, if any, for actions taken within the scope of his employment. Notwithstanding anything herein, no Termination Compensation shall be paid or otherwise provided until all applicable revocation periods have fully expired, and the mutual release becomes fully and finally enforceable. The parties hereto acknowledge that the Termination Compensation to be provided is in consideration for Mr. Dennis's release.

 

If Mr. Dennis terminates this Agreement by providing appropriate notice, the Company, at its election, may (i) require Mr. Dennis to continue to perform his duties hereunder for the full notice period, or (ii) terminate Mr. Dennis 's employment at any time during such notice period, provided that any such termination shall not be deemed to be a termination without cause of Mr. Dennis 's employment by The Company. Unless otherwise provided by this Section, all compensation and benefits paid by The Company to Mr. Dennis shall cease upon his last day of employment.

 

TERMINATION DUE TO DEATH. Mr. Dennis's employment under this Agreement will terminate immediately upon his death and The Company shall not have any further liability or obligations to Mr. Dennis's estate, executors, heirs, assigns or any other person claiming under or through Mr. Dennis's estate, except that Mr. Dennis's estate shall receive any accrued but unpaid salary or bonuses and any life insurance benefits to be paid pursuant to Mr. Dennis's beneficiary designation.

 

 

COMPLIANCE WITH EMPLOYER'S RULES. Mr. Dennis agrees to comply with all of the rules and regulations of The Company.

 

RETURN OF PROPERTY. Upon termination of this Agreement, Mr. Dennis shall deliver and return all Company and Company-related property (including keys, records, notes, data, memoranda, models, and equipment) that is in Mr. Dennis's possession or under his control. Such obligation shall be governed by any separate confidentiality or proprietary rights agreement signed by Mr. Dennis.

 

NOTICES. All notices required or permitted under this Agreement shall be in writing and shall be deemed delivered when delivered in person or on the third day after being deposited in the United States mail, postage paid, addressed as follows:

 

Employer:

 

American Virtual Cloud Technologies, Inc.

Thomas H. King

Chief Financial Officer

1720 Peachtree Street, Suite 629

Atlanta, Georgia 30309

 

Executive:

 

Michael Dennis

95 West Main Street

5-261,

Chester, NJ 07930.

 

Such addresses may be changed from time to time by either party by providing written notice in the manner set forth above.

 

BINDING AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their heirs, personal representatives, successors and assigns. In the event The Company is acquired, is a non-surviving party in a merger, or transfers substantially all of its assets, this Agreement shall not be terminated and the transferee or surviving company shall be bound by the provisions of this Agreement. The parties understand that the obligations of Mr. Dennis are personal and may not be assigned by The Company.

 

ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties and there are no other promises or conditions in any other agreement whether oral or written. This Agreement supersedes any prior written or oral agreements between the parties.

 

AMENDMENT. This Agreement may be modified or amended, if the amendment is made in writing and is signed by both parties.

 

 

SEVERABILITY. If any provisions of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid or enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited.

 

WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Agreement.

 

APPLICABLE LAW. This Agreement shall be governed by the laws of the State of Georgia.

 

EMPLOYER:
The Company
By:	/s/ Thomas H. King	Date: December 1, 2020
	Thomas H. King
	CFO
AGREED TO AND ACCEPTED.
EXECUTIVE:
Michael Dennis		Date:  November 30, 2020
Michael Dennis

 

 

6

Exhibit 10.9

 

 

Employment Agreement

 

 

This Employment Agreement (this "Agreement") is made effective as of December 1, 2020 by and between American Virtual Cloud Technologies, Inc. ("The Company") of 1720 Peachtree Street, Suite 629, Atlanta, Georgia, 30309 and Thomas King, ("Mr. King”), of 1298 Waterford Green Trail, Marietta, GA 30068. This Agreement replaces all prior employment agreements.

 

The Company is engaged in the business of Information Technology Services. Mr. King will primarily perform the job duties at the following location: 1298 Waterford Green Trail, Marietta, GA 30068.

 

A.

The Company desires to have the services of Mr. King.

 

B.

Mr. King is willing to be employed by The Company.

 

Therefore, the parties agree as follows:

 

EMPLOYMENT. The Company shall employ Mr. King as Chief Financial Officer. Mr. King accepts and agrees to such employment, and agrees to be subject to the general supervision, advice and direction of The Company and the Company's Board of Directors.

 

BEST EFFORTS OF EMPLOYEE. Mr. King agrees to perform faithfully, industriously, and to the best of his ability, experience, and talents, all of the duties that may be required by the express and implicit terms of this Agreement, to the reasonable satisfaction of The Company. Such duties shall be provided at such place(s) as the needs, business, or opportunities of The Company may require from time to time. Mr. King shall devote his full business time to the rendition of such Services, subject to absences for customary vacations and for temporary illness. In addition, Mr. King will not engage in any other gainful occupation which requires his personal attention and/or creates a conflict of interest with job responsibilities under this Agreement without the prior approval of the Board, with the exception that Mr. King may personally trade in stock, bonds, securities, commodities or real estate investments for his own benefit.

 

COMPENSATION OF EMPLOYEE. As compensation for the services provided by Mr. King under this Agreement, The Company will pay Mr. King an annual salary of $420,000 payable in accordance with the Company's usual payroll procedures. Upon termination of this Agreement, payments under this paragraph shall cease; provided, however, that Mr. King shall be entitled to payments for periods or partial periods that occurred prior to the date of termination and for which Mr. King has not yet been paid, and for any commission earned in accordance with The Company' customary procedures, if applicable. Accrued vacation will be paid in accordance with state law and The Company' customary procedures. This section of the Agreement is included only for accounting and payroll purposes and should not be construed as establishing a minimum or definite term of employment.

 

 

The Company may award Mr. King an At-Risk Annual bonus (the Bonus), in an amount up to 100% of his starting base salary. Such Bonus will be based on personal and corporate performance factors agreed upon by The Company.

 

Additionally, The Company has previously awarded Mr. King 3 00,000 Restricted Stock Units under the Company’s Equity Incentive Plan.

 

EXPENSE REIMBURSEMENT. The Company will reimburse Mr. King for "out-of-pocket" expenses incurred in accordance with the Company's policies in effect from time to time.

 

RECOMMENDATIONS FOR IMPROVING OPERATIONS. Mr. King shall provide The Company with all information, suggestions, and recommendations regarding The Company's business, of which Mr. King has knowledge, that will be of benefit to The Company.

 

CONFIDENTIALITY. The Company recognizes that Mr. King has and will have information regarding the following:

-

inventions

-

products

-

product design

-

processes

-

technical matters

-

trade secrets

-

copyrights

-

customer lists

-

prices

-

costs

-

business affairs

-

future plans

 

and other vital information items (collectively, "Information") which are valuable, special and unique assets of The Company. Mr. King agrees that he will not at any time or in any manner, either directly or indirectly, divulge, disclose, furnish, make accessible, or communicate any Information to any third party without the prior written consent of The Company. Mr. King will protect the Information and treat it as strictly confidential. A violation by Mr. King of this paragraph shall be a material violation of this Agreement and will justify legal and/or equitable relief.

 

This Agreement is in compliance with the Defend Trade Secrets Act and provides civil or criminal immunity to any individual for the disclosure of trade secrets: (i) made in confidence to a federal, state, or local government official, or to an attorney when the disclosure is to report suspected violations of the law; or (ii) in a complaint or other document filed in a lawsuit if made under seal.

 

UNAUTHORIZED DISCLOSURE OF INFORMATION. If it appears that Mr. King has disclosed (or has threatened to disclose) Information in violation of this Agreement, The Company shall be entitled to an injunction to restrain Mr. King from disclosing, in whole or in part, such Information, or from providing any services to any party to whom such Information has been disclosed or may be disclosed. The Company shall not be prohibited by this provision from pursuing other remedies, including a claim for losses and damages, attorneys' fees and costs incurred while seeking to enforce this Agreement.

 

 

CONFIDENTIALITY AFTER TERMINATION OF EMPLOYMENT. The confidentiality provisions of this Agreement shall remain in full force and effect for a two-year period after the termination of Mr. King's employment. During such two-year period, neither party shall make or permit the making of any public announcement or statement of any kind regarding Mr. King's employment by or connection with The Company.

 

INTELLECTUAL PROPERTY RIGHTS. All information, ideas, concepts, improvements, discoveries, and inventions, whether patentable or not, which are conceived, made, developed or acquired by Mr. King, individually or in conjunction with others, during his employment by The Company (whether during business hours or otherwise and whether on The Company' premises or otherwise) which relate to The Company's business, products or services (including, without limitation, all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names, and marks), and all writings or materials of any type embodying any of such items, shall be disclosed to The Company and are and shall be the sole and exclusive property of The Company.

 

NON-COMPETE AGREEMENT. Mr. King agrees and covenants that during his employment by The Company and for a period of one-year following the termination of Mr. King's employment, whether such termination is voluntary or involuntary, Mr. King will not directly or indirectly engage in any business competitive with The Company.

 

Directly or indirectly engaging in any competitive business includes, but is not limited to: (i) engaging in a business as owner, partner, or agent, (ii) becoming an employee, rendering advice or offering services to any third party that is engaged in such business, (iii) becoming interested directly or indirectly in any such business, or (iv) soliciting any customer or current Executive or Employee of The Company for the benefit of a third party that is engaged in such business. Mr. King agrees that this non-compete provision will not adversely affect Mr. King's livelihood.

 

During the Employment Period, Mr. King will devote his full-time efforts to the business of The Company and will not engage in consulting work or any trade or business for his own account or for or on behalf of any other person, firm or corporation that competes, conflicts or interferes with the performance of his duties under this Agreement.

 

BENEFITS. Mr. King shall be entitled to standard and customary employment benefits, including holidays, officer liability and indemnification insurance, vacation (not less than four weeks), health insurance, disability insurance and life insurance as provided by The Company policies in effect from time to time.

 

TERM/TERMINATION. Mr. King's employment under this Agreement shall be for an unspecified term on an "at will" basis. This Agreement may be terminated by The Company upon No written notice, and by Mr. King upon Two weeks written notice. If The Company shall so terminate this Agreement, Mr. King shall be entitled to compensation for One year of base salary. bonus and benefits (including health care and life insurance as applicable) beyond the termination date of such termination, unless Mr. King is in violation of this Agreement. If Mr. King is in violation of this Agreement, The Company may terminate employment with cause without notice and with compensation to Mr. King only to the date of such termination. As used in this Agreement, the term "Cause" shall include, without limitation: insubordination; dishonest; fraud; serious dereliction of duty; criminal activity; acts of moral turpitude; conviction of a felony, plea of guilty or nolo contendere to a felony charge or any criminal act involving moral turpitude. The compensation paid under this Agreement shall be Mr. King's exclusive remedy. If Mr. King's employment is terminated by The Company without cause, Mr. King shall continue to receive his base salary, bonus and benefits (including health care and life insurance as applicable) for a period of One year of base salary from the effective date of termination (the "Severance Period").

 

The salary and fringe benefits to be paid are referred to herein as the "Termination Compensation." Mr. King shall not be entitled to any Termination Compensation unless: (i) Mr. King complies with all surviving provisions of any non-competition agreement, non-solicitation agreement, confidentiality agreement or inventions assignment agreement that Mr. King signed, and (ii) Mr. King executes and delivers to The Company, after a notice of termination, a release in form and substance acceptable to The Company, by which Mr. King releases The Company from any obligations and liabilities of any type whatsoever under this Agreement, except for The Company' obligations with respect to the Termination Compensation, and that release shall not affect Mr. King's right to indemnification, if any, for actions taken within the scope of his employment. Notwithstanding anything herein, no Termination Compensation shall be paid or otherwise provided until all applicable revocation periods have fully expired, and the mutual release becomes fully and finally enforceable. The parties hereto acknowledge that the Termination Compensation to be provided is in consideration for Mr. King's release.

 

If Mr. King terminates this Agreement by providing appropriate notice, the Company, at its election, may (i) require Mr. King to continue to perform his duties hereunder for the full notice period, or (ii) terminate Mr. King 's employment at any time during such notice period, provided that any such termination shall not be deemed to be a termination without cause of Mr. King 's employment by The Company. Unless otherwise provided by this Section, all compensation and benefits paid by The Company to Mr. King shall cease upon his last day of employment.

 

TERMINATION DUE TO DEATH. Mr. King's employment under this Agreement will terminate immediately upon his death and The Company shall not have any further liability or obligations to Mr. King's estate, executors, heirs, assigns or any other person claiming under or through Mr. King's estate, except that Mr. King's estate shall receive any accrued but unpaid salary or bonuses and any life insurance benefits to be paid pursuant to Mr. King's beneficiary designation.

 

 

COMPLIANCE WITH EMPLOYER'S RULES. Mr. King agrees to comply with all of the rules and regulations of The Company.

 

RETURN OF PROPERTY. Upon termination of this Agreement, Mr. King shall deliver and return all Company and Company-related property (including keys, records, notes, data, memoranda, models, and equipment) that is in Mr. King's possession or under his control. Such obligation shall be governed by any separate confidentiality or proprietary rights agreement signed by Mr. King.

 

NOTICES. All notices required or permitted under this Agreement shall be in writing and shall be deemed delivered when delivered in person or on the third day after being deposited in the United States mail, postage paid, addressed as follows:

 

	Employer:
	American Virtual Cloud Technologies, Inc.
	Xavier Williams
	Chief Executive Officer
	1720 Peachtree Street, Suite 629
	Atlanta, Georgia 30309
	Executive:
	Thomas King
	1298 Waterford Green Trail
	Marietta, Georgia 30068

 

Such addresses may be changed from time to time by either party by providing written notice in the manner set forth above.

 

BINDING AGREEMENT. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their heirs, personal representatives, successors and assigns. In the event The Company is acquired, is a non-surviving party in a merger, or transfers substantially all of its assets, this Agreement shall not be terminated and the transferee or surviving company shall be bound by the provisions of this Agreement. The parties understand that the obligations of Mr. King are personal and may not be assigned by The Company.

 

ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties and there are no other promises or conditions in any other agreement whether oral or written. This Agreement supersedes any prior written or oral agreements between the parties.

 

AMENDMENT. This Agreement may be modified or amended, if the amendment is made in writing and is signed by both parties.

 

SEVERABILITY. If any provisions of this Agreement shall be held to be invalid or unenforceable for any reason, the remaining provisions shall continue to be valid and enforceable. If a court finds that any provision of this Agreement is invalid or unenforceable, but that by limiting such provision it would become valid or enforceable, then such provision shall be deemed to be written, construed, and enforced as so limited.

 

 

WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any provision of this Agreement shall not be construed as a waiver or limitation of that party's right to subsequently enforce and compel strict compliance with every provision of this Agreement.

 

APPLICABLE LAW. This Agreement shall be governed by the laws of the State of Georgia.

 

 

EMPLOYER:
The Company
By:	/s/ Xavier Williams	Date:	December 2, 2020
	Xavier Williams
	Chief Executive Officer

 

 

AGREED TO AND ACCEPTED.
EXECUTIVE:
By:	/s/ Thomas King	Date:	December 3, 2020
	Thomas King

 

 

Exhibit 99.1

 

 

 

AVCtechnologies Completes Strategic Acquisition of

Ribbon’s Kandy Communications

 

Creates an end-to-end Cloud Managed Services company with a comprehensive suite of Unified Communications as a Service (UCaaS), Communications Platform as a Service (CPaaS), and Contact Center as a Service (CCaaS) capabilities

 

Atlanta, GA and Westford, MA December 2, 2020 – American Virtual Cloud Technologies, Inc. (NASDAQ: AVCT) and Ribbon Communications Inc. (NASDAQ:RBBN) today announced that they have completed the previously announced acquisition of Kandy Communications (Kandy) by AVCT.

 

Kandy complements AVCT’s April 2020 acquisition of Stratos Management Systems, Inc. (dba Computex Technology Solutions) by providing a full suite of UCaaS, CCaaS, and CPaaS products to serve the rapidly growing cloud communications market. Customers today demand a highly reliable, secure, and scalable communications platform along with a world class customer experience. AVCtechnologies offers end-to-end services spanning from managed IT solutions, managed services, and cloud communications, delivered by certified experts to provide exceptional white glove customer experience to business customers, service providers, independent software vendors, and system integrators. AVCtechnologies is now positioned as a premier white label provider of choice for UCaaS, CCaaS and CPaaS.

 

“We are very pleased to welcome Kandy to the AVCtechnologies family,” said Xavier Williams, Chief Executive Officer of AVCtechnologies. Williams added “Kandy will be our linchpin, enabling us to provide carrier grade, global cloud communications that address the needs of medium and large enterprises. As the velocity of public, hybrid, and private cloud communications continues, we are in a fortunate position to be able to focus on execution while competitors in our space need to concentrate on platform capabilities, global expansion and improved customer experience. Kandy’s world class, globally-deployed, carrier grade, white-labeled proprietary communications platform gives AVCtechnologies the ability to solve customer communication needs. Kandy’s platform, significant growth trajectory, and global marquee customer and partner base, including AT&T, City of Los Angeles, IBM, and Etisalat (the largest telecom provider in the UAE), accelerates our go to market plans and enables us to expand our award-winning portfolio.”

 

Bruce McClelland, Ribbon’s CEO, stated “We are impressed with the depth of talent and vision of the AVCtechnologies’ management team and believe that with the addition of the innovative Kandy team, the company will continue to provide excellent service to channel partners and customers. We are confident that AVCT is poised to unlock additional value with Kandy, and we are excited to be a shareholder of the Company.”

 

The transaction was completed pursuant to the terms of an amended and restated purchase agreement. At the closing, AVCT issued to Ribbon units of securities consisting of convertible debentures in an aggregate principal amount of approximately $45 million and warrants to purchase an aggregate of approximately 4.5 million shares of AVCT’s common stock for an exercise price of $0.01 per share. The purchase price is subject to adjustment based on the net working capital of the Kandy business as of the closing date. In connection with the closing of the transaction, an affiliate of Navigation Capital Partners, Inc. entered into a subscription agreement with AVCT, pursuant to which it purchased $10 million in the same units of securities issued to Ribbon, and committed to purchase up to an additional $25 million of such units to provide the Company working capital to fund its anticipated growth.

 

  

About AVCtechnologies

AVCtechnologies provides comprehensive and innovative cloud based UCaaS, Cybersecurity, and IT solutions for over 900 enterprise customers, including 350+ managed service clients. Our mission is to be your partner for the delivery of reliable and secure managed cloud services, hardware, and software with an excellent customer experience. For more information, visit avctechnologies.com.

 

About Kandy

Kandy is a cloud-based, real-time communications platform offering proprietary UCaaS, CPaaS, and CCaaS capabilities. Kandy enables service providers, enterprises, software vendors, systems integrators, partners and developers to enrich their applications and services with real-time contextual communications, providing a more engaging user experience. With Kandy, companies of all sizes and types can quickly embed real-time communications capabilities into their existing applications and business processes. For more information visit kandy.io.

 

About Ribbon

Ribbon Communications (Nasdaq: RBBN) delivers global communications software and packet and optical network solutions to service providers, enterprises and critical infrastructure sectors. We engage deeply with our customers, helping them modernize their networks for improved competitive positioning and business outcomes in today’s smart, always-on and data-hungry world. Our innovative, end-to-end solutions portfolio delivers unparalleled scale, performance, and agility, including core to edge IP solutions, cloud-native offers, leading-edge software security and analytics tools, as well as 5G-ready packet and optical networking solutions acquired via our recent merger with ECI Telecom. To learn more about Ribbon visit rbbn.com.

 

Non-Solicitation

This press release shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction.

 

Important Information Regarding Forward-Looking Statements

This release contains forward-looking statements concerning AVCtechnologies, Kandy and Ribbon, the anticipated results of the transaction and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of the management of AVCtechnologies and Ribbon, as well as assumptions made by, and information currently available to, such management. Forward-looking statements may be accompanied by words such as “aim,” “anticipate,” “believe,” “seek,” “see,” “plan,” “could,” “would,” “should,” “estimate,” “expect,” “forecast,” “future,” “guidance,” “intend,” “may,” “will,” “possible,” “potential,” “predict,” “project,” “target” or similar words, phrases or expressions, and include statements regarding the anticipated benefits of the acquisition of Kandy by AVCtechnologies and the future results of the combined business. These forward-looking statements are subject to various risks and uncertainties, many of which are outside the parties’ control, such as statements about the consummation of the proposed transaction.

 

Factors that could cause actual results to differ materially from those in the forward-looking statements include risks that the new businesses will not be integrated successfully; failure to realize anticipated benefits of the combined operations; potential litigation relating to the transaction and disruptions from the transaction that could harm AVCtechnologies’ or Ribbon’s business; ability to retain key personnel; the potential impact of consummation of the transaction on relationships with third parties, including customers, employees and competitors; and conditions in the capital markets. The foregoing list of factors is not exhaustive. All of the parties’ forward-looking statements involve risks and uncertainties (some of which are significant or beyond the parties’ control) and assumptions that could cause actual results to differ materially from their respective historical experience and present expectations or projections. You should carefully consider the foregoing factors and the other risks and uncertainties that affect the parties’ businesses, including those described in the most recent respective Annual Report on Form 10-K and Quarterly Reports on Form 10-Q of the parties, as well as the other documents filed by the parties from time to time with the SEC. The parties caution you not to place undue reliance on any forward-looking statements, which speak only as of the date hereof. Neither AVCtechnologies nor Ribbon undertakes any obligation to publicly update or revise any of forward-looking statements after the date they are made, whether as a result of any changes in circumstances or new information, future events or otherwise, except to the extent required by applicable law.

 

 

 

 

PRESS / ANALYST CONTACTS

 

American Virtual Cloud Technologies, Inc.

Thomas King

+1 (404) 239-2863

[email protected]

 

Ribbon Communications, Inc.

 

Investor Relations

 

Monica Gould

+1 (212) 871-3927

[email protected]

 

North American Press

 

Dennis Watson

+1 (214) 695-2224

[email protected]

 

APAC, CALA & EMEA Press

 

Catherine Berthier

+1 (646) 741-1974

[email protected]

 

Analyst Relations

 

Michael Cooper

+1 (708) 212-6922

[email protected]

 

 

3

 

Exhibit 99.2

 

AVCT Announces Michael Dennis as New COO

 

Veteran telecommunications and technology executive selected to lead worldwide operations
Graham McGonigal will focus on key strategic planning initiatives

 

ATLANTA, Dec. 07, 2020 (GLOBE NEWSWIRE) -- American Virtual Cloud Technologies, Inc. (NASDAQ: AVCT), a leading cloud communications and IT service provider, is pleased to announce Michael A. Dennis joined the company as Chief Operating Officer on December 1, 2020.

 

Mr. Dennis succeeds Graham McGonigal who has served as AVCT’s Chief Operating & Strategy Officer. Mr. McGonigal will continue as AVCT’s Chief Strategy Officer.

 

Mr. Dennis is a veteran in the telecommunications and technology industries with twenty-five years of executive leadership and strategic execution leveraged across AT&T, Lucent Technologies, and Avaya. Over the course of his career, he held various Executive Leadership positions responsible for sales, sales operations, customer service, project management, manufacturing, outsourcing, professional services, infrastructure, and digital platform management. Most notable, during his tenure at Avaya as Group Vice President, Michael managed a service revenue portfolio of $3+ billion and twenty-five thousand associates with the responsibility to grow forty-three percent of the total technology equipment and professional service revenue base. He was a member of the Senior Leadership team that took Avaya public in 2000.

 

Mr. Dennis is an entrepreneur with a proven track record for delivering extraordinary profits by leveraging executive relationships to drive sales growth and access to new opportunities and partnerships. He was the principal owner of General Sports Venue-Astro Turf, a certified minority business enterprise and national synthetic turf company with exclusive rights to the AstroTurf brand, which he sold in 2009. In 2002, he served as a Partner and Chief Operating Officer for JNET Communications, a minority-owned firm serving the cable industry through installation and construction services. Mr. Dennis provided executive oversight for an $80M portfolio managing fiber and coax construction and infrastructure programs across the United States.

 

In his most recent position, Michael served as the President and Chief Executive Officer of Big Green Group (BGG), a Cellular Telecommunication and Broadband Services provider. He developed strategies to generate margins of twenty-five percent over the $8M revenue base, managing fiber deployment, installation, and maintenance for cellular towers. BGG’s clients included Ericsson, Sprint, T-Mobile, AT&T, and Sirius/XM. The company received MetLife’s small business of the year award in 2016.

 

“I am most grateful for the opportunity to join the AVCT team,” said Dennis. “It’s an honor to be a member of such a seasoned team of leaders who will shape the future of cloud communications, information technology, and managed service solutions. I welcome the opportunity to accelerate our growth to meet our strategic objectives. I am committed to helping the company achieve success by focusing on customer service, operational execution, and the engagement and contribution from the entire AVCT team.”

 

“As we enter a ‘New Day’ at AVCtechnologies, we are fortunate to have a seasoned operating executive and proven entrepreneur join us as the firm continues to evolve and grow,” said Xavier Williams, CEO AVCtechnologies.

 

Mr. Dennis has been featured in the New York Times’ Business section in an article regarding “Workforce Management Innovation” and profiled in the Sunday Times Boss’ column. He was recognized as one of the “Top 50 African-American leaders in Corporate America, Black Enterprise magazine. Michael also received the prestigious Eagle Award from the National Eagle Leadership Institute (NELI) in 2000. He served as the chairperson for INROADS, Central New Jersey, from 2003 to 2005. Mr. Dennis looks forward to joining the team at AVCtechnologies.

 

He earned a BA from Dartmouth College and has completed multiple executive programs – Darden School of Business, University of Virginia; Haas Business School, University of California at Berkeley; and the Tuck School of Business at Dartmouth College.

 

PRESS / ANALYST CONTACT

 

American Virtual Cloud Technologies, Inc.
Thomas King
+1 (404) 239-2863
[email protected]